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Inside Washington (04/30/2009)

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* WASHINGTON (5/1/09)--As federal regulators prepare to release the results of stress tests conducted at 19 national banks, financial observers wonder if the results could lead to Camel rating disclosures as well (American Banker April 30). Camel ratings assign an institution a score between 1 to 5--with 5 being the weakest. In the past, regulators have argued that releasing Camel ratings would cause a bank panic. Karen Shaw Petrou, managing director, Federal Financial Analytics, said releasing Camel ratings could encourage banks to do better. She likened the rating to a gradepoint average--a standard which students often share with each other. If a bank were downgraded, it might try to raise its rating again. Joseph Mason, financial professor at Louisiana State University, said disclosure on the ratings could help lawmakers direct where public funds should go. It also could improve supervision of institutions, he said ... * WASHINGTON (5/1/09)--The majority of financial institutions that underwent stress test are expected to pass, according to financial observers (American Banker April 30). Institutions that need more capital will convert preferred government shares to common stock, though it is unclear which institutions may need help. Bloomberg News reported Tuesday that Bank of America, Citi, KeyCorp, Regions Financial Corp., and SunTrust Banks Inc. may need more capital ... * WASHINGTON (5/1/09)--Ana Recio Harvey, recent president of the Greater Washington Hispanic Chamber of Commerce, has been named as the head of the Small Business Administration’s (SBA) Office of Women’s Business Ownership, SBA Administrator Karen Mills announced Thursday. Harvey will manage SBA’s efforts to promote the growth of women-oriented businesses through programs that address business training and technical assistance, and provide access to credit and capital, federal contracts and international trade opportunities. Harvey also will direct the SBA’s network of Women’s Business Centers ...

Credit card reforms pass House

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WASHINGTON (5/1/09)—The Credit Cardholders' Bill of Rights Act (H.R. 627) was approved by a 357-70 in the House Thursday, and a Senate vote on a similar bill (S. 414) is expected as early as next week. The House and Senate bills, for the most part, track credit card best practices that were adopted by federal regulators and go into effect next July. Both the regulators' rules and the legislation would ban double-cycle billing, universal default and prolonged payment periods, among other consumer-averse practices. However, the bills go a bit further in what they address. For instance, the lawmakers' plans would provide greater protections for underage consumers and would limit some fees. The Credit Union National Association (CUNA) generally supported the version of the bill that was approved by the House Financial Services Committee earlier in April because credit unions largely do not engage in the types of practices outlined in the legislative prohibitions, and the bill mirrored regulations credit unions will have follow beginning in July 2010. CUNA did express concerns about the legislation’s original effective date, and supported a successful amendment to the bill that extended the legislation's effective date from three months to one year after enactment or June 1, 2010--whichever comes first. "The House did approve several amendments," said Ryan Donovan, CUNA vice president of legislative affairs. "We've been reviewing the amendments and preparing for Senate consideration of the (Sen. Christopher) Dodd credit card bill next week." Donovan noted that ultimately a House-Senate conference committee may have to resolve differences between the two bills.

CUNA writes letter in support of NCUSIF amendment

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WASHINGTON (5/1/09)--Credit Union National Association (CUNA) President/CEO Dan Mica sent a letter of support Thursday to senators regarding an amendment to a housing bill that would extend the increase in federal share and deposit insurance. The amendment was added to S. 896, “Helping Families Save Their Homes Act of 2009” as the Senate debated the bill yesterday. It would extend for four years the increase in deposit insurance coverage, to $250,000, for the National Credit Union Share Insurance Fund and the Federal Deposit Insurance Corp. Congress enacted the coverage on a temporary basis as part of the Emergency Economic Stabilization Act of 2008, to underscore the safety of funds deposited in the nation’s credit unions and banks. The amendment would help credit unions “continue to help their members weather the financial crisis and maintain member confidence in credit unions,” Mica said. In addition to the insurance coverage, the amendment contains other provisions of key importance to credit unions. It would:
* Increase the National Credit Union Administration’s (NCUA) borrowing authority from Treasury from $100 million to $6 billion, with the ability to borrow as much as $30 billion in exigent circumstances through December 2010; and * Establish a Temporary Corporate Stabilization Fund that would also help NCUA spread out credit unions’ insurance costs over seven years.
CUNA strongly supports each of these provisions, and appreciates the Senate’s timely consideration of the amendment, Mica added. (See related story: CU action urged on NCUSIF provisions)

Seven cited in NCUA prohibition orders

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ALEXANDRIA, Va. (5/1/09)--The National Credit Union Administration (NCUA) Board has cited seven individuals in prohibition orders for offenses including bank fraud and larceny. According to NCUA, these former credit union personnel are prohibited from participating in the affairs of any federally insured institution:
* Robin E. Anderson, former branch manager of Advantage One CU, Morrison, Ill., who was convicted of bank fraud and sentenced to 27 months in prison, 3 years of supervised probation and ordered to pay $337,216 in restitution; * Hong Kyu Chun, former employee at Korean American Chamber of Commerce FCU, Bronx, N.Y., who was convicted of bank fraud and sentenced to 6 months house arrest, 3 years of supervised probation and ordered to pay $70,000 in restitution to the credit union; * Nora Costlow, former manager of BMA CU, Mesquite, Texas, who consented to entry of a prohibition order to avoid the time and cost of litigation; * Renee Gooden, former temporary employee of Empower FCU, Syracuse, N.Y., who was convicted of grand larceny and sentenced to 4 concurrent weekends in jail, 5 years of supervised release and ordered to pay $4,550 in restitution; * Leah Louise Krueger, former employee of Reliant FCU, Casper, Wyo., who pleaded guilty to larceny and received a suspended sentence of 6 to 8 years, which will be vacated provided 10 years of supervised probation is successfully completed. Krueger was order to pay $90,000 in restitution; * Nicola Graham-Perkins, former employee of North Broward Hospital District FCU, Ft. Lauderdale, Fla., who consented to entry of a prohibition order to avoid the time and cost of litigation; and * Kim Streibich, former employee of Silverado CU, Mountain View, Calif., who was convicted of grand theft and taking, damaging or destruction of property, and she was sentenced to 9 months in jail and 5 years of supervised probation.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For more information, use the link.

Predatory mortgage bill moves to House floor

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WASHINGTON (5/1/09)--A bill to curb abusive and predatory lending could be on its way to the House as early as next week. On Wednesday, the House Financial Services Committee approved H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. The legislation was sponsored by Reps. Brad Miller (D-N.C.), Mel Watt (D-N.C.), and Barney Frank (D-Mass.). The bill would:
* Ensure that mortgage lenders make loans that are beneficial for a borrower by banning yield spread premiums and other abusive compensation structures that reward originators for “steering” borrowers toward higher cost loans; * Require originators to disclose to consumers the compensation they receive from the transaction; * For mortgage refinancings, require that all loans provide a net tangible benefit to the consumer. Also, it would make the secondary mortgage market responsible for complying with these standards when it buys loans and turn them into securities; and * Require new federal rules to be written to require creditors to retain an economic interest in a material portion--at least 5%--of the credit risk of each loan that the creditor transfers, sells, or conveys to a third party. Federal banking agencies would have the authority to make exceptions to the bill’s risk retention provisions, including form and amount.
H.R. 1728 also encourages the market to move back toward fixed-rate, fully documented loans. During the housing boom, some mortgage lenders moved away from traditional underwriting practices in favor of more exotic loans. The Credit Union National Association (CUNA) supports the bill’s intent, although it has warned lawmakers that the legislation could conflict with regulatory actions already in place to curb abusive lending. Prior to the panel's approval of the bill, CUNA President/CEO Dan Mica sent a letter to Frank and Rep. Spencer Bachus (R-Ala.), encouraging the committee to consider "only those statutory changes which are absolutely essential." CUNA also has advised federal lawmakers that some provisions in the bill may be more appropriate for the mortgage brokerage industry. Credit unions have a long history of favorable lending practices, CUNA has said.

Helping Families debate to wrap up today

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WASHINGTON (5/1/09)—The Senate is expected to complete debate today on S. 896, the Helping Families Save Their Homes Act, and vote on the legislation that is primarily intended to help more homeowners stave off foreclosure. During yesterday’s consideration of the bill, the Senate spent hours deliberating over a judicial mortgage modification amendment offered by Sen. Richard Durbin (D-Ill.). The language, similar to that contained in a comparable House-approved bill that would allow bankruptcy judges to change terms of existing mortgage, was rejected 51-45 by the Senate. (See related story: Senate rejects ‘cramdown’ amendment.) Still being debated today are provisions, offered as an amendment by Sens. Christopher Dodd (D-Conn.) and Richard Shelby (R-Ala.), that would execute important changes for credit unions. The amendment, expected to succeed in some form, would:
* Create a Temporary Corporate Credit Union Stabilization Fund; * Allow credit unions to spread out the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. It would reduce from 1% of a credit union's insured shares to 0.15% of insured shares this year's cost of the National Credit Union Administration's corporate stabilization plan. * Increase National Credit Union Administration (NCUA) borrowing authority; and * Extend the higher share and deposit insurance coverage levels, first set as a temporary measure in October 2008 as part of the Emergency Economic Stabilization Act.
The Credit Union National Association (CUNA) strongly supports each of these provisions. CUNA President/CEO Dan Mica has contacted Senate lawmakers noting that CUNA appreciates the Senate’s timely consideration of the credit union provisions. Regarding the mortgage bankruptcy language, the issue could come up again, perhaps during a House-Senate conference convened to work out the differences between the two bodies’ legislation.

Senate rejects cramdown amendment

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WASHINGTON (5/1/09)—As the Senate Thursday moved toward final action on S. 896, the Helping Families Save Their Homes Act, it voted down by a six-vote margin an amendment that would have allowed judicial mortgage modifications. However, the provision’s chief sponsor—Senate Majority Whip Richard Durbin (D-Ill.)—put the Senate on notice that this defeat, with a 51-45 vote, is not the end of his battle to enact the mortgage bankruptcy provisions. Durbin declared on the Senate floor that if the language is not added to a House-Senate conference version of the bill at a later date, he will be back to the Senate with another bill. The Credit Union National Association (CUNA) was strongly opposed to the House-approved mortgage bankruptcy provisions. However, CUNA remained steadfast at the negotiating table in the Senate to help craft a bill that would represent good public policy while mitigating impact on credit unions. This week, when those negotiations stalled, CUNA President/CEO Dan Mica said CUNA is “gratified that we influenced a number of improvements to the legislation by our commitment." He also noted, “We have the utmost respect for Sen. Durbin; we look forward to working with him on many more important policy issues."

CUNA urges CU focus on call to Support S. 896

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WASHINGTON (4/30/09)—The Credit Union National Association (CUNA) said credit unions must stay focused on the grassroots call to action issued by CUNA and the leagues in support of Senate legislation due up for a vote today. That bill would mitigate the costs to credit unions of the National Credit Union Administration’s corporate stabilization program. CUNA said credit unions must disregard any conflicting instructions they encounter from some other quarters of the industry. For example, CUNA and the leagues received reports yesterday of calls circulating for credit unions to sign a petition requesting Congress delay consideration of the measure and hold hearings. “That petition drive was launched absent coordination with CUNA and the leagues. It has the potential to cause confusion or worse. not just among CUs but also among Senators and their staffs,” noted CUNA President/CEO Dan Mica. “Such actions are not helpful and could even be detrimental, hurting CUs by leaving them with no options to spread out their insurance costs should Congress interpret the mixed and divided messages as a reason to delay consideration of this critically important legislation,” he added. The measure to mitigate the corporate costs is expected to be part of an amendment to S. 896 offered on the Senate floor today by Senate Banking Committee Chairman Christopher Dodd (D-Conn.). The amendment would also extend the $250,000 deposit insurance levels that Congress enacted last year as a means of boosting consumer confidence in financial institutions. Yesterday CUNA and the leagues issued a call to action urging CUs to contact their Senators as soon as possible in support of S. 896. (See related stories in this morning’s News Now).

Cramdown unlikely in Senate housing bill

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WASHIINGTON (4/30/09)—A Senate housing bill, expected to be voted today, appears to be advancing with important language for credit unions, and without the contentious mortgage bankruptcy provisions it once featured. The bill (S. 896) intends to make permanent the increased, $250,000 deposit and share insurance cap. It would also allow credit unions to spread out the cost of their premium assessment that has resulted from losses at wholesale corporate credit unions. (See related stories: CUNA supports Dodd amendment to housing bill; CU action urged on NCUSIF provisions.) However, negotiations stalled between a key senator and financial services industry representatives—including the Credit Union National Association (CUNA)—over language that would have improved provisions allowing bankruptcy judges to modify—or cramdown—existing mortgages. Strongly opposed to a House-passed bill that gave broad authority to bankruptcy judges, CUNA worked closely with key senators and their staffs to narrow the scope of those provisions and mitigate its impact on credit unions in case Congress passed a bill containing that authority. CUNA President/CEO Dan Mica said Wednesday, “CUNA stayed at the table in the Senate, negotiating in good faith for sound public policy on behalf of credit unions and their members. We are gratified that we influenced a number of improvements to the legislation by our commitment.” He noted, however, that CUNA finally came to a point where the negotiations could not produce a bill that met all negotiating parties’ concerns and still pass the Senate. “Given this, we have suspended negotiations on the judicial mortgage modification provisions. We have the utmost respect for Sen. Durbin; we look forward to working with him on many more important policy issues,” Mica said.

Inside Washington (04/29/2009)

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WASHINGTON (4/30/09)--Hubert Hoosman Jr., (left) president/CEO of Vantage CU, Bridgeton, Mo., met Vice President Joe Biden in St. Louis April 17. Biden was in town at the University of Missouri-St. Louis for a speech on making college more affordable. The audience included U.S. Sen. Claire McCaskill (D-Mo.) and Missouri Gov. Jay Nixon. Hoosman is past president of the University of Missouri-St. Louis Alumni Association and remains active with the university. Vantage has $560 million in assets. (Photo provided by Vantage CU) ... * WASHINGTON (4/30/09)--Financial institutions may have more time to contest the results of stress tests that were given to 19 of the nation’s largest financial institutions. The results are expected to be released to the public May 4, and there is no clear cut-off date for banks to contest the results (American Banker April 29). The Federal Reserve Board Friday released stress test methodology ... * WASHINGTON (4/30/09)--Oral arguments Tuesday by some Supreme Court justices indicate support for the Office of the Comptroller of the Currency’s (OCC) ability to enforce laws--even state laws--at national banks (American Banker April 29). The high court heard a case related to a 2005 investigation by former New York Attorney General Eliot Spitzer, who asked for bank data so he could determine if they engaged in discrimination. The banks did not give him the data, so Spitzer threatened to sue. The OCC said it did not have to provide the information because of visitorial powers. Justice John Roberts, who voted against the OCC in a similar case--Watters v. Wachovia--appeared to side with the OCC. Justice David Souter noted language in the 1994 Riegle-Neal Act, which indicated that the OCC can enforce any law applied to national banks. However, Justice Ruth Bader Ginsberg said arguments that the Watters case sets a precedent for the current case are inaccurate. Justice Antonin Scalia said the federal government should not enforce state law, noting that it may not have the time to worry about state law ... * WASHINGTON (4/30/09)--Michael Bradfield, a Washington attorney, could be the Federal Deposit Insurance Corp.’s (FDIC) top pick for general counsel, according to financial industry observers. Bradfield served as a top lawyer at the Federal Reserve Board during the savings and loan crisis. He also worked at the Treasury from 1962 to 1975 (American Banker April 29). If chosen, Bradfield would succeed Sara Kelsey, who left the FDIC in October ... * WASHINGTON (4/30/09)--Democrats pushed Tuesday to widen the scope of which mortgages are permissible for modifications under legislation that aims to reform mortgage underwriting practices. Several amendments were proposed, including one that would widen the safe harbor to include fixed-rate loans less than 30 years old and adjustable-rate mortgages underwritten to the maximum rate in the loan’s first seven years (American Banker April 29). Fannie Mae, Freddie Mac and the Federal Housing Administration also could define which loans qualify for the safe harbor. Another proposed amendment would allow regulators to adjust a requirement that lenders have to take on 5% of a loan’s risk. A vote on the amendments was expected Wednesday ... * WASHINGTON (4/30/09) The Hope for Homeowners program will be included as a part of President Barack Obama’s Home Modification Program (American Banker April 29). The Treasury announced more program details Tuesday, most of which relate to second mortgages. Servicers who help borrowers with the Hope program will receive incentives, Treasury said. Anne Canfield, Consumer Mortgage Coalition executive director, noted that the Hope program is viable--but that some changes may need to be made. Others applauded the changes. The new details “address the 800-pound gorilla in the room--second liens,” according to Brian Chappelle, partner at Potomac Partners. (See Related: CUNA: CUs should note changes to loan mod program) ...

CUNA CUs should note changes to home mod program

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WASHINGTON (4/30/09)--Credit unions should note the changes to President Barack Obama’s Home Modification Program, specifically those involving second lien mortgages, according to Jeff Bloch, Credit Union National Association (CUNA) senior assistant general counsel. CUNA believes that credit unions would be most affected by changes regarding second liens and the inclusion of the Home for Homeowners Program (H4H). Incentives will be awarded to lenders who can modify monthly payments on second mortgages. On Tuesday, the Treasury Department released details on how second lien mortgages would be treated under the program. For second lien mortgages that amortize:
* The rate will be reduced to 1%. The cost will be shared with the government. After five years, the rate will increase in steps to the then-current rate of the first mortgage, which cannot exceed the prevailing mortgage rate at the time of the modification; * The term of the second loan will match the first lien mortgage and be amortized over the same period; * There will be principal forbearance in the same proportion as there may be for the first lien, but there is no requirement for principal forbearance for the first lien, unless the loan is refinanced under the Federal Housing Administration’s (FHA) H4H Program; and * Investors will receive incentive payments equal to half the difference between the interest rate on the first lien as modified and 1%, subject to a floor.
For interest-only second liens, the following will be required:
* The rate will be reduced to 2%, with the cost shared by the government. After five years, the rate will increase in steps to the then-current rate of the first mortgage, which cannot exceed the prevailing mortgage rate at the time of the modification; * The term of the second loan will match the first lien mortgage and be amortized over the same period. The second loan will be amortized over the originally scheduled amortization period if that is longer than the term of the first mortgage loan; * There will be principal forbearance in the same proportion as there may be for the first lien, but there is no requirement for principal forbearance for the first lien, unless the loan is refinanced under the H4H Program; and * Investors will receive incentive payments equal to half the difference between the lower of the contract rate on the second lien and the interest rate on the first lien as modified, and 2%, subject to a floor.
Servicers will receive $500 and then $250 per year for three years if the loan remains current. Borrowers will receive $250 per year for up to five years, which will be applied to the principal of the first mortgage. Lenders and investors also can extinguish second liens in exchange for a larger payment. The lender/investor will receive 3 cents on the dollar if the loan is more than 180 days past due. If the loan is less than 180 days past due, the lender or investor will receive between 4-12 cents on the dollar, based on the debt-to-income ratio and the loan-to-value of the second lien. Treasury announced that H4H also will be integrated into the Home Modification Program. When the borrower enters into a modification, the servicer will be required to evaluate the borrower for a H4H refinance and must offer that refinance if the borrower qualifies and agrees to the refinance. The H4H requirements differ in a number of ways from the Home Modification Program and specific factors will determine which will be the most beneficial to the borrower. Servicers can receive a $2,500 up-front incentive payment for successful H4H refinancing. Lenders who originate new H4H refinanced loans can receive up to $1,000 per year for up to 3 years, provided the refinanced loan remains current. The Housing and Economic Recovery Act of 2008 directed the FHA to refinance up to $300 billion in troubled mortgages through the H4H Program. Effective for loans originated on or before Jan. 1, 2008, eligible homeowners will be able to refinance their primary residence home loans into fixed-rate, FHA-backed loans. To qualify, the lender or mortgage investor must reduce the loan principal and would receive a guarantee for the reduced loan amount. For more information, use the links.

UBIT judge ponders governments premise

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WASHINGTON (4/30/09)— A district court judge’s pre-trial decision in an unrelated business income tax—or UBIT—case not only came out in favor of the plaintiff credit union’s witness list, it also pondered the premise of the government’s tax arguments. The case involved is Community First CU v. United States of America. The Appleton, Wis. credit union filed suit in January 2008 in the U.S. District Court for the Eastern District of Wisconsin against the United States seeking a refund of $54,000 in taxes paid in UBIT on income from several insurance products. Community First CU contends that the revenue from sale of the products is "substantially related" to the purposes and functions of the tax-exempt, state-chartered credit union. May 11 is the date set for a jury trial. On Tuesday, U.S. District Court Judge William Griesbach rejected the request of the government to disallow certain of the credit union’s witnesses, but also did not block any defendant witnesses. Notably, the judge also used the occasion to question aspects of the government’s intended line of testimony to support the Internal Revenue Service's UBIT position. For instance, Griesbach wrote: “The unstated, but apparent, premise of the government’s argument is that credit life and GAP insurance could (emphasis is the judge’s) be substantially related to a credit union’s tax-exempt purposes if they were offered at lowered rates. That is, no one argues that credit and GAP insurance isn’t related to the business of credit unions—the argument is simply that the premiums charged are too high.’ Noting that the credit union has said that 51% of its expenses take the form of dividend payouts to member deposits, the judge went on to ponder that members are “actually the beneficiaries of the insurance products in more ways than one.” “It would be one thing if there were allegations of lavish executive perks or waste,” the judge wrote adding that, instead, it appears the bulk of the premiums “is actually going into the pockets of the members who are depositors.” If that’s the case, Griesbach said, it seems the government’s objections to cost are “crippled.” Although the case will be decided by jury, the judge will decide points of law and instruct the jury in the case.

House backs Financial Literacy Month goals

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WASHINGTON (4/30/09)—The House adopted a resolution by voice vote Tuesday supporting the goals and ideals of Financial Literacy Month, including raising public awareness about financial education. Financial Literacy Month kicked off the beginning of April, and in a number of states there were gubernatorial proclamations, financial fitness fairs and educational workshops for youth, television shows to educate the public, and plans for motivating young members to save. (News Now April 3) Credit union participation in financial literacy efforts is strong. According to the Credit Union National Association's (CUNA) Financial Literacy Task Force, in 2008 nearly 80% of credit unions with assets of $10 million or more offered financial education to adults or youth, while more than half provide financial education to both. Credit unions with $50 million or more in assets are more likely to offer financial literacy programs than they were in 2005. The House resolution, adopted under suspension of the rules, was introduced by Rep. Ruben Hinjosa (D-Texas) and had 67 co-sponsors. As reported in News Now Tuesday, the need for improved financial education for consumers is great. About 41% of adults said they'd give themselves a C, D or F on financial literacy, according to the 2009 Consumer Financial Literacy Survey, a phone poll conducted annually to gauge the financial literacy of Americans.

Mica in IAtlantic MonthlyI on Obamas first 100 days

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WASHINGTON (4/30/09)--Credit Union National Association (CUNA) President/CEO Dan Mica was among three Washington notables in the Atlantic Monthly on President Barack Obama’s first 100 days in office. Mica was contacted by Atlantic along with former Sens. John C. Danforth (R-Mo.) and Bob Kerrey (D-Neb.) to provide perspective on the new administration. The Atlantic Monthly asked each to comment on Obama’s biggest strengths and weaknesses. The three noted some of their thoughts on Obama’s leadership abilities, demeanor and communication skills. The nation’s economic problems, national security and international concerns were also mentioned. Among the strengths Mica noted: Obama’s reach to the rest of the world, his calm approach to the nation, and his explanation of problems. One weakness could be his handling of declassified information. The nation traditionally pauses at each new administration’s 100th day in office to note how the president and administration are doing. Obama reached his 100th day in office Wednesday. To see the article, use the link.

IRS tax prep guide has tips for CUs

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WASHINGTON (4/30/09)--The Internal Revenue Service has provided a preparation checklist--with some tips that are applicable to credit unions--for tax-exempt organizations filing the 2008 Form 990. Form 990 must be filed by the 15th day of the fifth month in a credit union’s accounting period. For credit unions that are calendar year filers, the form would be due May 15. The tips from the checklist that are most relevant to credit unions include:
* Determining if the organization is eligible to file the Form 990-EZ for 2008; * Reviewing the redesigned 2008 Form 990 and final instructions (released in December 2008); * Identifying the appropriate schedules to complete; * Identifying officers, directors, and key employees; * Preparing to answer new questions about governance, executive compensation and insider transactions; and * Establishing and modifying internal systems to prepare for filing season.
The notice also provides a link to a document that highlights the changes between the 2007 and 2008 versions of Form 990. For more information, use the link.

CU action urged on NCUSIF provisions

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WASHINGTON (4/30/09)—With a Senate vote fast approaching on its bill to prevent mortgage foreclosures (S. 896), the Credit Union National Association (CUNA) is asking credit unions to urge lawmakers to adopt an amendment addressing National Credit Union Share Insurance Fund (NCUSIF) issues. Sen. Chris Dodd (D-Conn.), the bill's sponsor, has offered a manager's amendment that makes permanent the increased, $250,000 deposit and share insurance cap. The Dodd amendment also would allow credit unions to spread out the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. It would reduce from 1% of a credit union’s insured shares to 0.15% of insured shares this year's cost of the National Credit Union Administration’s corporate stabilization plan. In an Action Alert launched today, CUNA encourages credit unions to:
* Send a message today to both Senators urging support for the Dodd amendment to S. 896; and * Call or fax each senator’s district office with the same information. (District office contact information can be found at

CUNA meets with key Treasury officials on CU issues

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WASHINGTON (4/29/09)--Credit Union National Association (CUNA) President/CEO Dan Mica met with Treasury staff Monday to discuss credit union priorities, as well as President Barack Obama’s Mortgage Modification Program, of which credit unions have expressed interest. Mica met with Al Fitzpayne, deputy chief of staff; Seth Wheeler, deputy assistant secretary for Federal Finance; Fred Baldassaro, senior adviser, Office of Business and Public Liaison; and Mario Ugoletti, director, Financial Institutions. The CUNA leader presented information to the officials regarding credit unions' solid record of lending to small businesses, homeowners, and other consumers. Credit unions have continued to lend to their members and have provided tailored loan modifications to help borrowers avoid delinquency and default, Mica said. Mica also outlined for the new officials several credit union legislative priorities:
* Increased member business lending authority; * Changes to the Federal Credit Union Act, including the creation of a seven-year corporate stabilization fund to spread out the costs of assistance to corporate credit unions; * Credit unions’ opposition to House cramdown legislation; * Access to Troubled Asset Relief Program funds; and * The support of CUNA, credit union leagues and credit unions of the “Homes For Our Troops” program.
The group also discussed Obama’s homeowners’ program. On Tuesday, Obama announced new efforts--including the Second Lien Program, which will work in tandem with the first lien modifications offered under the Home Affordable Modification Program. Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate. Monday’s session was a “good first meeting,” Mica said, and noted that CUNA would follow up with the Treasury on some of the issues. Other CUNA staff in attendance: Bill Hampel, chief economist; Eric Richard, general counsel; and Mary Dunn, deputy general counsel.

Budget amendment would increase NCUA borrowing

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WASHINGTON (4/29/09)--An amendment that would increase the National Credit Union Administration’s (NCUA) borrowing authority was retained in a budget resolution conference agreement scheduled to be voted on by the House Tuesday. The Senate is expected to vote on the agreement today. The amendment, by Sen. Mike Crapo (R-Idaho) and Sen. Bob Corker (R-Tenn.), would increase NCUA’s borrowing authority to $6 billion from $100 million, and establish an emergency borrowing authority of $18 billion. The amendment also would allow credit unions to spread out realizing the premium cost associated with NCUA's corporate credit union stabilization efforts over five years. A deficit neutral reserve fund for the authority was included in the conference agreement, which means that the chairman of the Committee on the Budget of the Senate can revise the budget for one or more bills, joint resolutions, amendments, motions or conference reports to increase NCUA’s borrowing authority as long as it does not increase the budget’s deficit. Crapo’s amendment, which was approved unanimously by the Senate Banking Committee, was a “significant step” toward relief for credit unions, according to the Credit Union National Association (CUNA).

Inside Washington (04/28/2009)

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* WASHINGTON (4/29/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Monday the FDIC should be granted the power to step in and assist a systemically significant company when it is in trouble (American Banker April 28). The FDIC has more experience than any other agency to help, she said. The Treasury Department has proposed giving the FDIC more power, but trade groups have not supported the proposal, saying that the agency does not have the expertise to handle cleaning up non banks and the workload could hurt its mission as a deposit insurer. But creating a new agency to deal with non banks, Bair argued, would be counterproductive because the new entity would have to adjust to the environment ... * WASHINGTON (4/29/09)--The Financial Crimes Enforcement Network (FinCEN) has issued guidance that highlights factors credit unions should consider when determining the appropriateness of exempting a non-listed business from Currency Transaction Report (CTR) requirements. FinCEN allows credit unions to grant Phase II exemptions from the CTR filing requirements for non-listed businesses that meet certain specified criteria. However, the exemption is not available for non-listed businesses that derive more than 50% of their annual gross revenues from ineligible business activities. FinCEN expects credit unions to gather sufficient information to make a “reasonable determination” that a member derives no more than 50% of its annual gross revenues from ineligible business activities. Credit unions should consider their understanding of the member's business, purpose of accounts, actual and anticipated activity, and look at the member’s financial statements or a self-certification statement from the member when deciding whether to grant the exemption ... * WASHINGTON (4/29/09)--National Credit Union Administration (NCUA)
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Chairman Michael Fryzel met with the Credit Union Association of New York last week. The league visited Washington, D.C., to meet with its congressional delegation, including Sen. Charles Schumer (D-N.Y.). “The activism of the New York league and member credit unions in governmental affairs is impressive,” Fryzel said. “Dialogue with both NCUA and Capitol Hill is essential, and I continue to encourage credit union involvement in the process.” From left are: Robert Nemeroff, marketing director, Melrose CU; Michael Lanotte, senior vice president and general counsel, Credit Union Association of New York; Fryzel; Paul Sonsnowski, general counsel and vice president of compliance, Polish and Slavic FCU; Amy Kramer, vice president of governmental affairs, the association; and William Mellin, president/CEO, the association. (Photo provided by the Credit Union Association of New York) ... * WASHINGTON (4/29/09)--Several briefings on the swine flu have been scheduled to take place on Capitol Hill. Sen. Tom Harkin (D-Iowa) planned an emergency hearing yesterday, and Sen. Joseph Lieberman (I-Conn.) scheduled a hearing for Wednesday. Rep. Frank Pallone Jr. (D-N.J.) planned to hold a hearing for Thursday to examine how federal, state and local health agencies will deal with the situation. The Credit Union National Association offers several resources about what to do in a pandemic situation. A webinar on the subject also will be available today ... * ALEXANDRIA, Va. (4/29/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel encouraged Ohio credit union leaders during an annual meeting in Cleveland, Ohio, to stay member-focused and involved as dialogue about NCUA’s corporate stabilization plan moves forward. “None of this is being considered in a vacuum,” he said. “We actively solicited and received significant and helpful input from almost 500 commenters, and you can rest assured that your views will be integral to whatever final product emerges. This is your corporate system, created, governed, and directed by you for over 30 years. You properly have a voice in what new, reformed corporate network emerges and I strongly encourage you to stay involved.” ...

Power Breakfast to feature Sen. Majority Leader Reid

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WASHINGTON (4/29/09)--Senate Majority Leader Harry Reid (D-Nev.) and Ronald Brownstein, Atlantic Media political director, will lead discussion during Friday’s Power Breakfast, sponsored by the Credit Union National Association (CUNA) and the National Journal Group. Reid will be the event speaker and Brownstein will serve as the moderator. They will discuss the political viability of the Senate’s agenda for the current Congress as well as the challenges that Reid will be facing in 2010 elections. Sen. Reid will also be discussing his book, “The Good Fight.” The breakfast will begin at 8 a.m. in the Reserve Marine Officers building. CUNA and the National Journal have sponsored the breakfast for the last two years.

Senate vote on housing bill may be this week

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WASHINGTON (4/28/09)--Though the Senate is expected to act on one of two housing bills this week, it’s not clear which one will be considered. Last week, Sens. Dick Durbin (D-Ill.), Christopher Dodd (D-Conn.) and Charles Schumer (D-N.Y.) introduced two bills--S.895 and S.896. Both are similar to H.R. 1106--Helping Families Save Their Homes Act--which has been passed by the House. However, S. 896 does not contain judicial mortgage modification language, otherwise known as cramdown. The Credit Union National Association (CUNA) strongly opposed H.R. 1106 when it was passed by the House of Representatives in March. CUNA expects that the judicial mortgage modification provisions that are ultimately considered by the Senate will be significantly more limited than those passed by the House. A Senate bill also could include language that would allow credit unions to spread out assessment costs over seven years in association with the National Credit Union Administration’s (NCUA) corporate credit union stabilization fund. The added language also could increase NCUA borrowing authority and implement a permanent increase to $250,000 for federal share and deposit insurance for credit unions.

Inside Washington (04/27/2009)

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* WASHINGTON (4/28/09)--Last week, the Federal Reserve Board released some details about stress tests given to 19 of the nation’s largest banks. The Fed indicated that the tests showed banks were well-capitalized, but that doesn’t necessarily mean that several of those banks will not have to raise capital, said financial industry observers. According to an analysis by FBR Capital Markets, Bank of America Corp. is perceived to be one of the more vulnerable institutions. Wells Fargo, Regions Financial Corp., Fifth Third Bancorp and KeyCorp also are perceived to need more capital (American Banker April 27). The Fed has said it will release complete test results Monday. Regulators are encouraging banks to build up their capital to absorb potential losses. Fed officials also have cautioned that the stress tests may not be representative of worse-case scenarios ... * WASHINGTON (4/28/09)--Democrats are hoping to receive approval for a $3.5 trillion budget to celebrate President Barack Obama’s 100th day in office. A vote on the budget is scheduled in the House today and in the Senate Wednesday (The New York Times April 27). The budget, which is opposed by many Republications, is perceived to encompass Obama’s initiatives on transportation, education, energy and health care ... * WASHINGTON (4/28/09)--The Supreme Court is scheduled to meet today to decide whether the Office of the Comptroller of the Currency (OCC) can enforce laws--even state laws--against a national bank (American Banker April 27). The case is related to a 2005 investigation conducted by former New York Attorney General Eliot Spitzer, who asked Citigroup, Wells Fargo and Co., and JP Morgan Chase and Co. to provide him with data so he could determine if they engaged in discrimination. The banks did not give him the data, so Spitzer threatened to sue them. The agency said they did not have to give up the data because of visitorial powers. Current New York Attorney General Andrew Cuomo, who took on the case after Spitzer, argued that a federal preemption does not prevent a state from prosecuting its laws. The OCC said that the court has already supported their position in the Watters V. Wachovia case, which ruled that OCC could enforce laws over banks ... * WASHINGTON (4/28/09)--David Moffett, former Freddie Mac CEO, has made a temporary return to the enterprise as a consultant after its former chief financial officer, David Kellerman, died last week (The Wall Street Journal April 27). Moffett resigned from Freddie Mac in March ... * WASHINGTON (4/28/09)--The Federal Deposit Insurance Corp. (FDIC) warned banks Friday about shell scams. Shell companies are usually limited liability companies without significant assets (American Banker April 27). The businesses involved with the scams are offering customers with poor credit histories the ability to receive unsecured business loans by substituting their own information with the shell company’s information ...

Whats ahead this week in committee hearings

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WASHINGTON (4/28/09)--This week’s congressional hearings schedule is a bit lighter than usual--but there are still some issues relevant to credit unions, such as the mark up of a mortgage reform bill. On Tuesday, the House Financial Services Committee is set to mark up H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. The bill was introduced in March by Reps. Brad Miller (D-N.C.) and Mel Watt (D-N.C.), and intends to curb predatory lending practices. CUNA submitted a letter to the committee regarding the legislation last week. CUNA supports the bill’s intent but said that lawmakers should revise existing mortgage lending laws before pressing for additional laws that could be redundant or conflicting with new regulations. Also on Tuesday, the Senate Banking Committee plans to meet on several pending nominations to the Treasury Department. On Thursday, the Joint Committee on Economics plans to hold a hearing on the economic outlook.

House could act on credit card practices bill

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WASHINGTON (4/28/09)--The House could vote on a bill this week--H.R. 627, the Credit Cardholders’ Bill of Rights Act--which aims to protect credit card holders. H.R. 627 would prohibit creditors from considering a payment as late unless the consumer is provided with reasonable time to make payments. The bill also would require creditors to mail statements to cardholders at least 25 days before the due date. The Credit Union National Association (CUNA) generally supports the bill. In its testimony, CUNA had encouraged the committee to consider a 21-day threshold because the 25-day requirement would be too close to the end of the billing cycle and create logistical problems for credit unions. A manager’s amendment was added that includes the threshold CUNA sought. CUNA also encouraged the committee to extend the effective date to July 1, 2010--which also was added in an amendment. H.R. 627 largely parallels rules that the National Credit Union Administration and Federal Reserve Board of Governors finalized and go into effect July 2010. However, CUNA is concerned that an amendment to regulate interchange fees may be offered by Reps. Peter Welch (D-Vt.) and Bill Schuster (R-Pa.). CUNA strongly opposes any effort to regulate interchange fees, and is hopeful that the rules committee will not make such an amendment in order.

Fin-lit survey results disheartening

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WASHINGTON (4/28/09)--About 41% of adults say they’d give themselves a C, D or F on financial literacy, according to the 2009 Consumer Financial Literacy Survey. Complete results of the survey are scheduled to be unveiled today at a congressional briefing on Capitol Hill. One thousand adults age 18 and older participated in the survey. Other findings:
* 26% admitted to not paying all of their bills on time; * 32% reported that they have no savings; and * 33% said they do not put any part of their income toward retirement; up from 28% in 2008.
The report indicated that if the survey results were applied to the general population, it would show that more than 58 million adults do not pay their bills on time, 72 million have no savings, and more than 74 million do not put any part of their income toward retirement. “These results are disheartening, but certainly not surprising,” said Jim Hanson, vice president of the Credit Union National Association’s (CUNA) Personal Finance department. “We know that financial literacy challenges are significant among all consumer demographic groups, not just among youth or new immigrants. And while there is no shortage of financial education materials available to consumers, the issue has often been about creating demand for financial education. “In today's economic market, the demand should certainly be there. Educating consumers about wise money management won't happen overnight. It's a marathon, not a sprint,” he added. The phone survey is conducted annually to gauge the financial literacy of Americans. The results were tracked by sex, age, ethnicity, income level, geographic region, and education and tracked over the three-year period, when available. In 2006, CUNA formed a Financial Literacy Task Force, which hosted a financial literacy summit in its inaugural year and has issued a report on improving member financial literacy. To see the full report, use the link.

Compliance Who can request a loan mod

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WASHINGTON (4/27/09)—For loan modifications under the Obama "Making Home Affordable" plan, credit unions cannot solicit borrowers who are current or less than 31 days delinquent on their mortgage payments,note the compliance experts at the Credit Union National Association (CUNA). However, they remind credit unions that such members can contact the credit union to request modification of their mortgage payments if they are at risk of “imminent default”. The Obama administration program will then require the credit union to determine that the borrower is in fact “in danger of imminent default and underwrite the mortgage to program terms” using either the stated-income or income-documentation processes. For more compliance information, use the resource link below to visit the CUNA Compliance Challenge.

NCUA steps in to ensure Fla. CU service

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ALEXANDRIA, Va. (4/27/09)—Temporary control of the daily operations of Eastern Financial Florida CU was assumed Friday by the National Credit Union Administration (NCUA). After the Florida Office of Financial Regulations, Bureau of Credit Union Regulation placed the credit union into conservatorship, the NCUA took over to assure continued service to the Miramar credit union’s 193,000 members and to ensure safe and sound operations of its 22 branches. “The federal regulator’s decision to step in and takeover the daily operation of Eastern Financial Florida Credit Union demonstrates that the regulatory system put in place to protect the members of our nation’s credit unions really works,” Credit Union National Association (CUNA) President/CEO Dan Mica declared Friday. CUNA statistics show that Eastern’s approximately $1.6 billion in assets places it as the 64th largest in the country—down from 48th in 2007. NCUA year-end figures show:
* Total equity is down to $10,096, nearly a 100% drop from previous quarter; and * Net income is negative -$133.4 million, a 143.4% decline from previous quarter.
The credit union also had significantly higher delinquency ratio (5.18%) and net charge-offs (4.18%) than its peer averages of 1.22% and 0.79% respectively. ROA is negative 6.54%. "Eastern’s takeover and the factors that precipitated it are not typical to the credit union industry as a whole. As a group, credit unions are conservatively managed, particularly as it pertains to their lending practices and the oversight of their loan portfolios,” Mica pointed out. He added: “As an industry our loan delinquency and charge off rates are climbing somewhat due to the difficult economy, but they are still well below those of commercial banks. In addition, as an industry the average capital-to-assets ratio of credit unions is about 10%, well above the industry standard of 7% for being “well capitalized." He also underscored that even in the current difficult economy, the country’s 8,000 credit unions are actively making loans to America’s consumers and small businesses. Federally insured credit union accounts are covered to at least $250,000 by the National Credit Union Share Insurance Fund, a federal fund backed by the full faith and credit of the U.S. government.

Senators urge card rate freeze

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WASHINGTON (4/27/09)—Sens. Charles Schumer (D-N.Y.) and Christopher Dodd (D-Conn.) called on federal regulators to implement an emergency freeze on interest rates tied to existing credit cards balances. In a letter to Federal Reserve Chairman Ben Bernanke and other regulators, the senators noted that the Fed already has issued a rule to ban the practice of retroactively raising the interest rates on existing credit-card balances. But they urged the Fed not to wait until July 2010 to make it effective, as the rule states. Senators noted that the rule is not scheduled to take effect until July 2010, giving companies more than a year to hike rates on consumers preemptively to get under the deadline. Both Senators said they have heard complaints from constituents who have seen their rates double or even triple almost overnight and without explanation.

Inside Washington (04/24/2009)

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* WASHINGTON (4/27/09)--The Federal Deposit Insurance Corp. (FDIC) plans to offer loan packages to investors starting in June that would serve as the first phase of the agency’s Legacy Loans Program. The phase will be a pilot sale of loans to test the program, FDIC Chairman Sheila Bair said (American Banker April 24). Some banks already have committed to participating and the test will help to create a larger program, she added. The Legacy Loans Program aims to attract private capital through an FDIC debt guarantee and Treasury equity co-investment (News Now April 10) ... * WASHINGTON (4/27/09)--On Friday, federal regulators detailed the criteria used to stress-test the nation’s 19 largest banks but did not provide much new information for investors to determine which banks are stronger than others (The New York Times April 24). The report suggested that regulators are concerned about the amount of capital they want banks to hold in common stock to cushion them against future losses. Using the information from Friday’s report, Wall Street is already using the information to make bets on which bank stocks may rise or fall. Final results will be made public May 4. Regulators plan to inform banks that need more capital ...

NCUA advisory addresses changes to Corporate CU Share Guarantee Program

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ALEXANDRIA, Va. (4/27/09)--The National Credit Union Administration (NCUA) Board Friday issued another media advisory to provide information on recent changes to the Temporary Corporate Credit Union Share Guarantee Program. In its Weekly Corporate Credit Union Update, NCUA said it would permit corporate credit unions to use the capital level as reported on their Nov. 30, 2008, NCUA 5310 Call Report to determine regulatory compliance with capital-based requirements and regulations in the corporate rule. “We believe this will allow corporate credit unions to continue to meet members’ needs while also ensuring corporates do not take additional undue risk,” said NCUA Chairman Michael Fryzel. However, the Office of Corporate Credit Unions (OCCU) director has the authority to restrict or modify this general waiver for a particular corporate credit union based on safety and soundness considerations. The update states that NCUA anticipates the March 2009 call reports of “some corporate credit unions will reflect losses that will be absorbed by capital." The Credit Union National Association is working to obtain information from NCUA on this assessment. The NCUA board also authorized extensions of the program through December 2012, which was set to expire Dec. 31, 2010. “There is concern that a significant amount of shares may be scheduled to mature on the Program expiration date--leading to an unintended negative impact on liquidity. Going forward, there will be a quarterly reassessment of the liquidity needs in the corporate system, and if it is determined the need exists, the program will be extended,” NCUA said. If the extensions are granted, the final guarantee will expire on Dec. 31, 2014. All corporate credit unions can participate in the modified program.

Cramdown vote coming prospects unclear

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WASHINGTON (4/24/09)—A measure that would allow bankruptcy judges to change--or “cramdown”—the terms of existing mortgages could come up for a vote in the Senate as early as next week, according to press reports Thursday. Senate Majority Whip Richard Durbin held a press conference mid-day on the legislation, which is an amended version of a House bill (H. R. 1106), strongly opposed by the Credit Union National Association (CUNA). Although against the broad cramdown provisions in the House bill, CUNA has continued to work with Senate lawmakers and their staffs to mitigate the effect on credit unions if such a bill is passed into law. The measure primarily has been supported by Democrats and opposed by Republicans. Enough centrist Democrats oppose the mortgage bankruptcy provisions, of what is a broader bill, to put its prospects into question, according to press reports. John Magill, CUNA senior vice president of legislative affairs, said CUNA-supported portions of the bill, such as authority for credit unions to spread out assessment costs associated with the National Credit Union Administration’s corporate credit union stabilization fund, may may still come up as part of a larger housing bill.

Inside Washington (04/23/2009)

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* WASHINGTON (4/24/09)--The National Credit Union Administration (NCUA) board approved revisions to delegations of authority that transfer the responsibilty for chartering new federal credit unions from the regions to the Office of Small Credit Union Initiatives (OSCUI). Under the changes, the OSCUI now has the authority to approve or disapprove new charters and has authority to enter into a Letter of Understanding and Agreement. The OSCUI must concur if a regional director wants to revokie a new charter if the credit union fails to commence operations within a specific time frame ... * WASHINGTON (4/24/09)--The Obama administration would like to see changes to a credit card bill that could be taken up by the House Thursday. Among the changes: the administration would like card companies to disclose how long it would take cardholders to pay off a balance when they only make minimum payments, and force card issuers to get cardholders’ permission before they are charged a fee for exceeding credit limits. The administration also wants to require that banks apply payments first to balances carrying the highest interest rate, and require any teaser interest rate to be offered for at least six months (American Banker April 23). The legislation, by Rep. Carolyn Maloney (D-N.Y.) passed the House Financial Services Committee Wednesday ... * WASHINGTON (4/24/09)--It has been two months since the Treasury Department announced its intention to expand the Term Asset-Backed Securities Loan Facility (Talf) but so far, no changes have been made and financial observers express doubt that the changes will ever happen (American Banker April 23). The Treasury said it would expand Talf to include mortgage-backed securities and eventually take on legacy securities. The Federal Reserve Board runs and finances Talf and has not indicated that it will act on the proposed expansion. Chris Low, FTN Financial economist, said there isn’t much that can get Talf going because the [economic] climate has changed. Bert Ely, a consultant in Alexandria, Va., said few companies have used Talf, which makes it more challenging to expand it. The biggest obstacle to expanding Talf, however, is executive compensation restrictions. Most investors would not be interested in having to follow the restrictions, although it is not clear if the restrictions apply to Talf, observers said ...

Upcoming NCUA small CU workshops look at red flags more

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ALEXANDRIA, Va. (4/24/09)—The National Credit Union Administration (NCUA) is offering a free training workshop, hosted by the agency's Office of Small Credit Union Initiatives, in Philadelphia today. The session is the third in a series offered around the nation and is expected to address the following topics:
* Issues facing credit unions from a regional perspective; * Updates regarding identify theft “red flags;” * Credit and liquidity risks; and * Updates to the credit practices rule and proposed amendments to Truth in Lending rules.
The schedule for the training sessions for the rest of the year is as follows:
* May 2, sessions in Phoenix and in New York, NY; * May 8, Detroit, Mich.; *May14, Minneapolis, Minn.; * June 4, Portland, Maine.; * June 6, Salt Lake City, Utah; * June 27, San Antonio, Texas; * July 16, Louisville, Ky.; * Aug. 13, Kansas City, Mo.; * Aug. 26, Alexandria, Va.; * Aug. 27, Cleveland, Ohio; * Sept. 10, Charleston, W.V.; * Sept. 12, Seattle, Wash.; * September 23, Erie, Pa.; * Sept. 24, Chicago, Ill.; * Sept. 26, Boston, Mass.; * Oct. 4, Los Angeles, Calif.; * Oct. 7, Baton Rouge, La.; * Oct. 15, Memphis, Tenn.; and * Oct. 17, Honolulu, Hawaii.
Use the resource link below to access agenda and registration information.

Mortgage reform bill should be last resort say CUNA

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WASHINGTON (4/24/09)—Lawmakers should continue to work closely with federal regulators to revise mortgage lending laws before pushing on with legislation that could be redundant or conflicting with new regulations, said the Credit Union National Association (CUNA) Thursday. In a letter to the top members of the House Financial Services Committee, CUNA President/CEO Dan Mica said credit unions support efforts to eliminate predatory mortgage lending practices. The committee conducted a hearing Thursday on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act, and the CUNA letter will be added to the hearing record. While supporting the bill’s intent, Mica urged lawmakers to resist pressing for additional laws before assessing the effectiveness of a series of regulatory actions currently underway to address mortgage lending problems and concerns. Among the five regulatory proposals named, Mica noted that the Federal Reserve Board currently is reviewing its closed-end lending rules and its home equity lending rules under Regulation Z, which implements the Truth in Lending Act. Proposed rules are expected to be issued for comment later this year. “As the Committee proceeds with consideration of H.R. 1728, CUNA urges consideration of only those statutory changes which are absolutely essential,” Mica said in his letter to Chairman Barney Frank (D-Mass.) and Rep. Spencer Bachus (R-Ala.), the panel’s ranking member. The CUNA letter also addressed concerns specific to the bill under consideration, which was introduced in March by Reps. Frank, Brad Miller (D-N.C.) and Mel Watts (D-N.C.). For example, CUNA noted that certain provisions could trigger lawsuits under the Truth in Lending Act (TILA), an area already rife with legal challenges. To read more about this and other concerns, use the resource link below to access the CUNA letter.

Mica Use emotions energy constructively

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WASHINGTON (4/24/09)—Whether you are a lawmaker or the head of a trade association, there will be a time when constituents’ emotion over a hot topic will have to be transformed into positive energy, said Credit Union National Association (CUNA) President/CEO Dan Mica in his latest monthly column in The Hill. Mica has experience in both roles. He is a former U.S. congressman representing Florida and currently in his thirteenth year heading CUNA. In his April “K Street Insider” contribution, Mica said that in both positions he has needed to be able to help those he represents to contain their strong feelings and find the right solution to a pressing challenge. He added that the country’s deep recessionary environment is demanding that those who work on Capitol Hill, or for constituency groups like CUNA, be more mindful than ever of heated emotions. He cited CUNA’s recent example of channeling members’ upset about some federal regulatory decisions addressing corporate credit union liquidity into positive action. Mica noted that the governing body for federally insured credit unions recently had to step in and take over two wholesale “corporate” credit unions. That action is funded through insurance assessments on the country’s 8,000 federally insured “natural person” credit unions. Never in his 13 years at CUNA, Mica said, has an issue generated as much e-mail from members. And some of the messages, he added, were quite heated. CUNA successfully turned the passion behind the issue into an email-writing campaign in which 15,000 messages were sent from credit unions directly to the three-member National Credit Union Administration board. One board member congratulated CUNA and credit unions on their grassroots approach to their concerns, but others at the regulatory agency were not happy to receive so many e-mails. “I explained to the agency’s chairman that expressing concerns in this way was more productive for us and for the agency than having our members storm Capitol Hill, which many were ready to do,” Mica said. “A prominent and savvy CEO said in a recent conversation: ‘A good leader never lets a crisis go to waste,’” Mica said.

Cramdown changes remain a CUNA priority

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WASHINGTON (4/23/09)--Noting the ongoing work of his organization to reduce the impact of mortgage bankruptcy legislation on credit unions, Credit Union National Association (CUNA) President/CEO Dan Mica said Wednesday he believes progress has been made on two key issues. Mica noted a pronouncement issued by the National Association of Federal Credit Unions (NAFCU) that said it opposed compromise legislation currently being worked out in the Senate. NAFCU said its board voted unanimously Tuesday to oppose the revised mortgage bankruptcy provisions because of a lack of available information regarding work-out plans for subordinate liens, as well as how the Senate legislation would affect existing private mortgage insurance contracts. NAFCU sent a letter to Sen. Dick Durbin (D-Ill.), the majority whip, and the entire Senate announcing its opposition on Wednesday. Mica said CUNA was surprised at the content of NAFCU’s letter: “We thought that association had always opposed the House version of cram downs, as has CUNA.” “From the beginning of the discussions with the Senate, all opposed the House version of the bill, and CUNA engaged in good-faith negotiations aimed at good public policy and addressing concerns of our industry,” Mica said. He added,” In fact, because we stayed at the table, we believe we are very close to acceptable resolutions on the two issues mentioned by NAFCU.” However, he underscored that no deal has been made by CUNA regarding the revised legislation. “This is not the time to merely walk away; there is too much at stake for credit unions, including additional issues that have a direct impact on credit unions and service to their members. CUNA will continue to work with Sen. Durbin and Senate leaders to develop a legislative approach that limits negative impact on credit unions.” The U.S. House of Representatives voted 234-191 March 5 in favor of H.R. 1106, Helping Families Save Their Homes Act—its version of mortgage bankruptcy—or “cramdown”—legislation. The bill would allow broad authority for bankruptcy judges to modify the terms of existing mortgages, which the CUNA has said could lead to borrowers' gaming of the system.

CDRLF grants process open for business

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ALEXANDRIA, Va. (4/23/09)—There will be $975,000 worth of grants and loans for qualified credit unions this year through the National Credit Union Administration’s (NCUA) Community Development Revolving Loan Fund (CDRLF) Technical Assistance Grant Program, and the awards process starts now. The funds were approved as part of the Obama administration’s spending package signed into law in March. The CDRLF was established by Congress in 1979 to support credit unions that serve low-income communities. Federal credit unions wishing to participate in the CDRLF’s programs must be designated as a low-income credit union, as defined by NCUA regulations. State-chartered credit unions must have the equivalent low-income designation from its respective state supervisory authority and concurrence from NCUA. In a recent Letter to Credit Unions (09-CU-09), the NCUA noted this year’s technical assistance grant initiatives are:
* Building capacity, building technology; * Enhancing member services; * Staff, official, and board member training; * Student Internship; and * Volunteer Income Tax Assistance (VITA).
The NCUA noted additionally it has set aside funds for Urgent Needs Grant, earmarked for eligible credit unions in cases of extreme necessity. Use the resource link below to access 2009 TAG guidelines, as well as to read the NCUA letter.

Inside Washington (04/22/2009)

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* WASHINGTON (4/23/09)--The number of loan modifications Fannie Mae and Freddie Mac completed in January increased by 3% compared with December and the prior-three month average, according to a Federal Housing Finance Agency report. In January, 8.953 loan modifications were completed, compared to 8,688 in December and 7,926 three months earlier. Of the modifications completed, 65% required an interest rate reduction and term extension, 19.5% required only a term extension, and 5.3% required an interest rate reduction only ... * WASHINGTON (4/23/09)--The Congressional Oversight Panel expressed their opposition Tuesday to a Treasury Department proposal that would convert preferred shares of banks to common stock (American Banker April 22). Converting the shares to common stock would not stabilize a financial institution and would put taxpayers at greater risk, argued Rep. Jeb Hensarling (R-Texas). The panel also said banks should be allowed to repay government funds from the Troubled Asset Relief Program immediately. Hensarling and former Sen. John Sununu (R-N.H.) both said healthy institutions should be allowed to repay the funds, but Treasury Secretary Timothy Geithner asked if the companies would have enough capital to lend and if they are working for the American people for recovery ... * WASHINGTON (4/23/09)--Big banks should break up, said top economists at a hearing Tuesday. The banks should be broken up unless there is compelling evidence that they shouldn’t be separated, said Joseph Stiglitz, Columbia University professor who has won a Nobel prize. Simon Johnson, Massachusetts Institute of Technology professor, said there aren’t any “compelling” advantages to size, while the disadvantages of being large are “dramatic” (American Banker April 22). Rep. Carolyn Maloney (D-N.Y.), told reporters after the hearing that lawmakers are still considering how systemically significant firms should be handled under a new regulatory environment ...

House panel approves credit card bill

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WASHINGTON (4/23/09)--The House Financial Services Committee Wednesday voted 48 to 19 in favor of a credit card best practices bill that, in most areas, tracks regulatory changes that go into effect next July. The Senate Banking Committee approved a similar bill (S. 414) in March and if adopted by both the full House and Senate and signed into law, the legislation would serve to back up the regulators’ prohibitions on abusive and deceptive card practices. Both the regulators’ rules and the House and Senate bills would ban double-cycle billing, universal default and prolonged payment periods. However, the bills go a bit further in what they address. For instance, the lawmakers’ plans would provide greater protections for underage consumers and would limit some fees. On April 2, the House Financial Services subcommittee on financial institutions approved the Credit Cardholders' Bill of Rights Act (H.R. 627) by voice vote. As the Credit Union National Association (CUNA) testified at a hearing a few weeks before the subcommittee vote, credit unions back the intent of legislation to protect consumers from abusive and deceptive practices. However, CUNA urged that any new law create an equitable balance between those protections and the needs of providers to be fairly compensated for the service and not subjected to unnecessary regulatory burdens. CUNA contacted Rep. Luis Gutierrez (D-Ill.), chairman of the subcommittee, just prior to the vote to support amendments to the bill that would be beneficial to credit unions. CUNA noted in the letter that the bill would require creditors to provide cardholders, in each periodic statement, a telephone number, Internet address, and website address at which the cardholder may request the payoff balance on the account. Most credit unions already provide a telephone number but should not be required to also provide an Internet address and website since not all credit unions have interactive Internet capabilities, CUNA said. CUNA also supported a successful amendment to the bill that extended the legislation's effective date from three months to one year after enactment or June 1, 2010--whichever comes first.

Inside Washington (04/21/2009)

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* WASHINGTON (4/22/09)--Federal Reserve Board Chairman Ben Bernanke met with Timothy Geithner 17 times in January and February, according to central bank records (American Banker April 21). The meetings indicate that the Fed is working closely with the Treasury department. Records also show that Bernanke met with Paul Volcker, former Fed chairman and top economic adviser to President Barack Obama, and several lawmakers, including Senate Majority Leader Harry Reid (D-Nev.), House Speaker Nancy Pelosi (D-Calif.), House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) ... * WASHINGTON (4/22/09)--Regulators are feeling pressured to increase enforcement orders against depository institutions, Deborah Dakin, deputy chief counsel for businesses transactions at the Office of Thrift Supervision (OTS) said in a speech at Pepperdine University Friday (American Banker April 21). Regulators used to think they could work with management without issuing the orders, but now are feeling as though they have to document everything. She clarified that the views she was expressing were her own, and not those of the OTS ...

Corporate CU share guarantee extended

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ALEXANDRIA, Va. (4/22/09)--The National Credit Union Administration (NCUA) voted Tuesday to provide an option through its Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) that would allow quarterly extensions of the guarantee through December 2012. Under the two-year rolling expiration date, the final guarantee would expire Dec. 31, 2014. Twenty-three corporates are currently participating in the guarantee program. The NCUA also reopened program enrollment until May 15 to give the remaining four an opportunity to consider participation in the revised TCCUSGP. The agency said its actions Tuesday include revisions to TCCUSGP agreements with corporate credit unions to eliminate ambiguities, provide greater flexibility and improve operations. “The action of the NCUA board sends a clear signal to natural person credit unions that their investments in corporate credit unions are not only safe, but also meet sound asset liability management principals by providing for orderly laddering of these investments,” said NCUA Chairman Michael Fryzel in a statement. He added, “It is important that they continue to provide the liquidity that is needed to maintain corporate stability. The board is committed to the safety and soundness of all credit unions and the protection of the deposits of the 90 million credit union members, and we will continue to take the necessary action to instill confidence in the system.”

New round of funds available from CDFI

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WASHINGTON (4/22/09)—The U.S. Treasury Department Tuesday announced the availability of $63 million in new funds through its Community Development Financial Institutions (CDFI) Fund. Treasury invited applications for financial assistance awards through its CDFI program and its Native American CDFI Assistance (NACA) program. A total of $63 million in awards will be made; $55 million under the FY 2009 supplemental funding round of the CDFI Program and $8 million under the FY 2009 supplemental funding round of the NACA Program. The additional funds were made available by an appropriation in the American Recovery and Reinvestment Act of 2009. The application deadline for the supplemental funding round of the FY 2009 CDFI Program and the FY 2009 NACA Program is 5:00 p.m. (ET) on May 27. Credit unions interested in Community Development Financial Institution (CDFI) certification should note the Treasury Department kicked off a series of conference calls on the subject April 16 and will hold three more sessions in the coming months. The upcoming sessions are scheduled for:
* May 21, 2 p.m. EST; * June 18, 2 p.m. EST; and * July 16, 2 p.m. EST.
To access the conference calls, participants must call (202) 927-2255 and enter in the pin number 315646. No prior registration is necessary. The phone number and pin number are the same for all of the conference calls. Use the resource link below for more CDFI information.

NCUA votes on UDAP changes CLF positions

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ALEXANDRIA, Va. (4/22/09)—The National Credit Union Administration (NCUA) proposed clarification of its unfair and deceptive acts or practices (UDAP) rule and approved some staffing changes at the Central Liquidity Facility (CLF), among other actions, at its open meeting Tuesday. The clarification involves a rule issued jointly in December by the
Click to view larger image NCUA Chairman Michael Fryzel prepares to open Tuesday’s public meeting at which the three-member board considered five items including clarifications to an unfair and deceptive practice rule that goes into effect July 1. Seated behind the chairman is NCUA Deputy Executive Director Larry Fazio. (CUNA photo)
NCUA, Office of Thrift Supervision and the Federal Reserve Board and will take the form of additional official staff commentary. The agencies intend the further guidance to facilitate compliance with the final UDAP rule. If adopted, it would specifically amend portions of the regulation that address deferred/waived interest credit card programs and the Servicemembers Civil Relief Act (SCRA). The effective date of the rule is July 1, and the NCUA requested comment on the clarification proposal within 30 days of the date the plan is published in the Federal Register, which is likely to occur within two weeks. Specifically, the proposals would clarify that:
* Key protections in the final rules continue to apply to balances on a consumer credit card account when the account is closed or acquired by a different institution, or when the balances are transferred to another account issued by the same institution; * Institutions are banned from increasing the rate on a credit card balance because the account has been closed; and * Institutions and retailers may continue to offer deferred interest and similar programs, but the programs are subject to all protections in the final rules.
Regarding its staffing decision for the CLF, the NCUA agreed to upgrade two existing jobs and add two new positions to the CLF force. CLF President Owen Cole requested and was granted a ranking upgrade for the position of division director of the office of capital markets and planning. Also upgraded was the current position of National Capital Markets Specialist, which will now be National/Senior Capital Specialist. The new positions are a senior level position with a special focus on CLF lending, and a technician’s position. Cole said the cost to the CLF, which is a self-funded entity, will be $178,000 and the cost to the NCUA would be $119,000.

NCUA to address five items

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ALEXANDRIA, Va. (4/21/09)—The National Credit Union Administration will consider five items at its open board meeting this morning, including a proposed rule on Part 706 of its Unfair or Deceptive Acts or Practices rule. Also on the agenda:
* Delegations of authority, Office of Small Credit Union Initiatives; * Creditor claim appeal; * Budget, Office of Capital Markets and Planning and Central Liquidity Facility; and * A monthly National Credit Union Share Insurance Fund report.

Loan mod participation agreements available online

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WASHINGTON (4/21/09)—The agreement lenders and servicers must execute in order to participate in the Obama administration’s loan modification program is now available on a number of associated websites. Fannie Mae, the "financial agent" charged—along with the U.S. Treasury Department--with managing the Obama administration's loan modification program, recently posted the agreement form on its website. It is also available on the Freddie Mac website and at a government website named after the administration’s loan modification program, “Making Home Affordable.” Also available at those sites is online guidance regarding the loan modification program, including some recently updated information. As noted April 9 in News Now, both Freddie Mac and Fannie have substantial roles both the refinance and the modification components of the administration plan meant to mitigate foreclosures. The updated guidance covers a broad range of subjects. For instance, a section discusses the Net Present Value (NPV) Test and how it should be applied under the Making Home Affordable (HMP) loan modification program. All loans that meet the HMP eligibility criteria, as described in the online materials, and are either deemed to be in “imminent default” or at least 60 days delinquent must be evaluated to determine whether their NPV dictates that the loan would be modified or moved toward foreclosure. Use the resource links below to access the websites.

Geithner to testify on TARPs first six months

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WASHINGTON (4/21/09)—The Congressional Oversight Panel charged with keeping tabs on the expenditures of the Troubled Asset Relief Program (TARP) set a hearing today at which U.S. Treasury Secretary Timothy Geithner will testify. Earlier this month the panel released a six-month report on TARP, which indicated mixed results of the Treasury program’s success to help resolve the country’s financial crisis. Elizabeth Warren, the panel’s chairman, said at the time that the Treasury's outlook on the crisis has focused on banks' problems as temporary and has failed to acknowledge that the crisis may be deeper. The report noted that Treasury has spent or committed about $590.4 billion of the total $700 billion in TARP funds approved by Congress, and has relied on the Federal Reserve's balance sheet to leverage the spending--which has expanded by more than $1 trillion. Warren said, "Treasury's efforts to date could be enough, but we will continue to press them."

Inside Washington (04/20/2009)

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* WASHINGTON (4/21/09)--President Barack Obama has picked Fannie Mae President/CEO Herbert Allison to lead the Troubled Asset Relief Program (TARP) as assistant Treasury secretary for financial stability. If approved by the Senate, Allison would replace Neel Kashkari (The Associated Press April 19). Some financial observers have said that if Allison moves from his post at Fannie to lead TARP, it will send a message that the CEO position at the government-sponsored enterprises is irrelevant because the Federal Housing Finance Agency runs Fannie and Freddie (News Now April 16) ... * WASHINGTON (4/21/09)--Investors haven’t borrowed from the Term Asset-Backed Securities Loan Facility (TALF) because they fear borrowing money from the Federal Reserve would trigger congressional scrutiny, said William Dudley, president of the Federal Reserve Bank of New York. The concern is unnecessary, but could indicate that investors don’t want to take risks in the economic environment--which in turn could be detrimental for businesses and consumers who want to secure credit (American Banker April 21) ...

Inside Washington (04/17/2009)

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* WASHINGTON (4/20/09)--Regulators could publish a paper Friday about the methodology behind stress tests given to 19 of the nation’s largest banks (American Banker April 17). The tests were given to gauge the institutions’ ability to withstand adverse economic conditions. Regulators plan to release the preliminary test results May 4 ... * WASHINGTON (4/20/09)--Federal Deposit Insurance Corp. (FDIC) Chief Operating Officer John Bovenzi announced that he plans to leave the agency in several weeks. Bovenzi started his career at the FDIC before the savings and loan crisis, later managed the FDIC’s research department and then became top deputy to former FDIC Chairman L. William Seidman (American Banker April 17). Bovenzi took a break from his job at the FDIC in July to become CEO of the failed IndyMac Bank, which the FDIC took into conservatorship ... * WASHINGTON (4/20/09)--The Treasury Department has been asked by financial industry trade groups to allow banks to repay Troubled Asset Relief Program (TARP) rescue funds without charging them to repurchase extended warrants under the program. Public companies are required to issue warrants that equal up to 15% of the government’s investment, while nonpublic companies were required to pay 5% (American Banker April 17). If the warrants aren’t redeemed, the Treasury could risk criticism that it’s continuing to help the banks, said Gil Schwartz, a partner at Schwartz and Ballen LLP. Industry representatives met with President Barack Obama on the issue last week ...

NCUA releases summary of PIMCO report

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ALEXANDRIA, Va. (4/20/09)--The National Credit Union Administration (NCUA) released a summary of the analysis of the Pacific Investment Management Company, LLC (PIMCO) on the residential mortgage-backed securities held by corporate credit unions Friday. The summary does not provide a detailed review of PIMCO's analyses or findings, but it provides information on the process for valuing the loans on which the mortgage-backed securities are based and information on PIMCO's views and conclusions. The summary states: “The results of cash flow projections (for the underlying loans) showed a wide range of possible value results due to the volatility of the items that impact cash flow projections. Market prices derived from third party vendors and PIMCO's internal analysis were significantly lower than the aggregate fair value of the same securities reported by the corporate credit unions (as of Jan. 31, 2009).” Earlier last week, it was expected that NCUA would also address extinguishment of the capital in WesCorp and U.S. Central. However, the release said that issue will be addressed following the release of the analysis for the Clayton Fixed Incomes Services, Inc. Clayton is reviewing private label mortgage-backed securities at U.S. Central and WesCorp. NCUA used the Pacific Investment Management Company (PIMCO) to supplement its own analysis of the corporates, but Clayton’s review will help to more fully inform NCUA of projected loss exposure for the share insurance fund, NCUA said. The Clayton analysis is expected to be complete by the end of this month or early May for posting March 31 statements. CUNA had urged NCUA to hold off making further statements about capital extinguishment until the Clayton analyses are available. Unlike impairment, which is addressed by Generally Accepted Accounting Principles, extinguishment of capital would be determined by NCUA. Once extinguishment has been determined, any recoveries relating to the securities would go to the corporate credit union's retained earnings and would not have to be distributed on the basis of paid-in-capital and member capital accounts at the time of conservatorship, even though such capital would be used for the losses. CUNA questions whether extinguishment for corporate credit unions is appropriate and continues to urge NCUA to consider other alternatives. CUNA will continue to urge NCUA to provide more information to credit unions on its loss estimates for the two conserved corporate credit unions and how those estimates are determined.

Whats ahead in Congress this week (04/17/2009)

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WASHINGTON (4/20/09)--Congress is back in session this week after a two-week break. Both senators and congressman are expected to take up issues of interest to credit unions. The House Financial Services Committee is expected to consider and vote on Rep. Carolyn Maloney’s (D-N.Y.) bill that aims to curb abusive and deceptive credit card practices. The panel also may mark up legislation on predatory mortgages. Maloney’s bill would require credit card companies to give 45 days’ notice prior to an interest rate change and prohibit credit card companies from increasing rates on existing balances except under certain circumstances. A similar bill has been introduced by Sen. Christopher Dodd (D-Conn.) in the Senate. On the Senate side, the Credit Union National Association has continued to work for modifications in pending legislation that would allow bankruptcy courts to modify, or “cramdown,” terms of existing mortgages. On March 5, the House voted 234-191 in favor of H.R. 1106, Helping Families Save Their Homes Act, which contained cramdown provisions. CUNA strongly opposes the House bill and has continued to work in the Senate for changes before that chamber votes on the measure. CUNA believes there is an opportunity to limit the scope, application and duration of the legislation. Though CUNA does not support the cramdown provisions in H.R. 1106, it does support another provision that would make higher share and deposit insurance ceilings permanent. Although H.R. 1106 is highly controversial in the Senate, a vote could be called within the next few weeks.

Predatory mortgage hearing set for next week

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WASHINGTON (4/17/09)—There will be a hearing April 23 on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 200, according to an announcement Thursday by the House Financial Services Committee. The bill was introduced in March by Reps. Brad Miller and Mel Watt, both Democrats from North Carolina, and is intended to curb predatory lending practices. Specifically, according to the co-sponsors at the time of its introduction, the new measure would strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan's interest rate and terms—known as yield-spread premiums. It also includes stronger language on "assignee liability," intended to make mortgage securitizers, who package home loans into securities, more liable for fraudulent loans. A key element of the legislation would ban lenders from underwriting loans that consumers do not have a reasonable ability to repay and prohibit practices that increase the risk of foreclosure for consumers. The bill also encourages the mortgage market to make it the norm to write 30-year, fixed-rate, fully documented loans, and move away from growth of "exotic" mortgages, which were a major factor in the current housing and foreclosure crisis. The Credit Union National Association (CUNA) strongly supports congressional action to protect consumers from abusive and deceptive lending practices. Yet, CUNA has advised federal lawmakers that credit unions' long history of favorable lending practices, and the range of regulation under which the movement operates, makes some provisions of such legislation more appropriate for the mortgage brokerage industry.

SBA announces leadership management team

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WASHINGTON (4/17/09)--The U.S. Small Business Administration (SBA) has appointed several members on its leadership and management team of Administrator Karen Mills, who was confirmed April 3. SBA appointees include:
* Meaghan Burdick, White House liaison; * Christopher Chan, special assistant to the administrator and scheduler; * Darryl K. Hairston, associate administrator of the Office of Management and Administration; * Subash S. Iyer, special assistant to the administrator; * Joseph G. Jordan, associate administrator of government contracting and business development; * Ginger E. Lew, counselor to the administrator and liaison to the National Economic Council; * Sara D. Lipscomb, general counsel; * Ana M. Ma, chief of staff; * Toby J.G. McGrath, associate administrator for the Office of Field Operations; * Kimberly A. Peyser, confidential assistant to the administrator; * Penny K. Pickett, senior adviser to the administrator, and acting associate administrator for the Office of Entrepreneurial Development; * Jonathan L. Swain, assistant administrator for Communications and public liaison; and * Eric R. Zarnikow, associate administrator for capital access.
The Credit Union National Association (CUNA) has emphasized that credit unions are ready to help the nation’s small businesses revive the economy and has worked with the SBA on issues affecting credit unions. CUNA is currently monitoring provisions of President Barack Obama’s economic stimulus package regarding SBA lending. SBA 7(a) and 504 lending would benefit from a provision in the package that would raise the percentage of a loan that the SBA can guarantee to 90% from 85%. Credit unions benefit from the increase because the guaranteed portion of such loans does not count toward the member business lending cap of 12.25% (News Now Feb. 10).

NCUA Agenda for FCU Act event set

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WASHINGTON (4/17/09)--The agenda for a symposium marking the 75th anniversary of the Federal Credit Union Act is available, the National Credit Union Administration (NCUA) announced Wednesday. The event is scheduled for June 9-10 at the Hyatt Regency Washington, D.C. It aims to celebrate 75 years of federal credit union history and provide a forum to discuss federal credit unions’ futures. Rep. Paul Kanjorski (D-Pa.) will give keynote address at 9 a.m. June 9. Two panels, “Is the Cooperative Financial System Still Relevant?” and “Other Financial Service Models” will follow. John Hope Bryant, founder, chairman and CEO of Operation HOPE is scheduled to give a luncheon address. Two more panels, “The Future of the Corporate Credit Union System,” and “Perspectives on Supplemental Capital for Credit Unions” will follow the luncheon. On June 10, the event will offer a fifth panel, “Sustainability, Innovation, Collaboration and Growth.” For more information, use the link.

Inside Washington (04/16/2009)

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* WASHINGTON (4/17/09)--Bankers indicate that they are most concerned with the overall economy and the effect of increasing premiums on Federal Deposit Insurance Corp. (FDIC)-insured institutions, according to the FDIC’s Ombudsman Report to the Industry, released Wednesday. The report covers July 1, 2008 to Dec. 31, 2008. About 643 bankers contacted the Office of the Ombudsman requesting assistance. Staff spoke with 65 industry representatives about banking matters through telephone calls, conferences and outreach visits. During the reporting period, FDIC resolved 21 bank failures ... * WASHINGTON (4/17/09)--Mortgages and refinancings at large financial institutions are rising, but consumer lending is dropping, according to a survey conducted by the Treasury Department (American Banker April 16). The survey included large financial institutions receiving funds from the Troubled Asset Relief Program (TARP). Sixteen of the 21 firms surveyed said the number of mortgage originations increased, and two said originations decreased. Home equity line lending rose by 18%. Industrial and consumer lending weakened in all categories. Survey participants said their commercial and industrial lending dropped by 4% and origination of those loans dropped 13%. The Treasury stated that the drop in lending results from low demand ... * WASHINGTON (4/17/09)--Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, is balancing a number of responsibilities and may need to re-focus, according to financial industry observers. Dodd will need to spend time campaigning in Connecticut and talking to voters, said Stuart Rothenberg, political analyst. At the same time, he has committee responsibilities. Former Rep. John LaFalce said Dodd could run as a populist--on the consumer side--and focus on overdraft fees, derivative regulation or predatory lending, instead of regulatory reform, though reform is a key priority for President Barack Obama and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. Dodd told American Banker (April 16) that he is focusing on helping Obama build a new financial system that protects consumers and investors. He also is working to crack down on abusive card practices, evidenced by legislation he introduced--S.414--which was approved by the Senate Banking Committee (News Now April 1) ... * WASHINGTON (4/17/09)--Fannie Mae and Freddie Mac modified 24,000 loans during the fourth quarter of 2008--a 76% increase over the third quarter, the Federal Housing Finance Agency (FHFA) said in a release Wednesday. The FHFA also instituted a suspension on foreclosures from Nov. 26 to Jan. 31, which reduced the number of foreclosures in the quarter by 27%. Modifications represented 34% of fourth-quarter loss mitigation actions, compared with 22.2% in the third quarter, FHFA said ...

Compliance Can loan mod program help this woman

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WASHINGTON (4/15/09)—The current economic climate may be causing problems for an unprecedented number of mortgage holders, but for some it will not be the first time they have faced difficulties making mortgage payments. Are they still qualified for help under the Obama administration’s loan modification plan? That’s what Martha Member, featured in the April Credit Union National Association (CUNA) Compliance Challenge wants to know. She asks her federal credit union if she can apply for a mortgage modification under “Making Home Affordable” program, even though six years ago she requested modifications to her loan due to temporary job loss. Compliance Challenge says, Go ahead, Martha. The administration’s plan does not bar individuals whose mortgages have been previously modified under another program. Any mortgage holder, of course, must meet eligibility and verification requirements. They include such things as: the mortgage involved was originated on or before Jan. 1, 2009, and it’s first-lien loan for an owner-occupied property. However, a mortgage borrower can apply for assistance under this program only once. “If a member needs additional mortgage assistance at a later date, then the credit union should attempt to address those needs with other loss mitigation alternatives,” the Challenge advises. Use the resource links below for more information.

NCUA says guidance coming on extinguishment

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ALEXANDRIA, Va. (4/16/09)—The National Credit Union Administration (NCUA) intends to issue its next accounting guidance on corporate credit union issues Friday as part of its weekly release of information on the corporate situation. NCUA Deputy Executive Director Larry Fazio, on a conference call with reporters Wednesday, said the guidance will address the impairment—what the agency is now terming ”extinguishment”—of any OTTI statement that U.S. Central FCU or Western Corporate FCU (WesCorp) make on their March 31 financial reports. The two corporates were place in conservatorship in March. Fazio said that to the extent either entity has to execute an OTTI—or other-than-temporarily-impaired--charge for the March statement, it will be realized as a loss that will “eat through” their retained earnings, and then their paid-in capital accounts, and, to a varying extent, their membership capital accounts. “So that will extinguish those portions of the membership capital and paid-in capital,” Fazio said. “Therefore credit unions that are members will have to write down on their financial statements those instruments, and realize a loss on those.” Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn noted Wednesday that credit unions have raised serious concerns about the implications of the extinguishment of capital in the two corporates. CUNA, she said, is pursuing these concerns with NCUA board members.

Inside Washington (04/15/2009)

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* WASHINGTON (4/16/09)--Several watchdog reports indicate that banking agencies are not using their power effectively. The reports come as policymakers consider giving regulators more power. The Federal Deposit Insurance Corp. and the Treasury’s inspectors general have written eight reports on bank failures since April 2008. The reports suggest that regulators did not crack down enough on lenders taking risks during the housing boom (American Banker April 15). Some former regulators have discounted the reports, but other financial industry observers perceive the reports as a guide to help figure out what went wrong. The reports are required from a bank when its failure will cost the Deposit Insurance Fund more than $25 million. As the number of bank failures has increased, the number of reports also has increased... * WASHINGTON (4/16/09)--The Obama administration plans to reveal the results of stress tests conducted at 19 of the nation’s biggest banks (The New York Times April 15). The banks are all expected to pass the tests. Releasing the results could give investors a better idea of which institutions are strong or weak, clearing up rumors, observers say. The administration’s decision also may have been triggered by Goldman Sach’s announcement that it would repay the $10 billion it received from the Troubled Asset Relief Program (TARP). Goldman sold $5 billion in stock on Tuesday and said it would use the profits to repay the TARP funds. Treasury officials this week said they would encourage banks to reveal their information, although critics have said that the hypothetical situations under which the banks are tested may not be realistic. Concern about stress tests in general has been high. Last week, the Federal Reserve warned banks undergoing the tests not to divulge the results during the earning season ... * WASHINGTON (4/16/09)--President Barack Obama said during a speech at Georgetown University Tuesday that he does not support nationalizing the nation’s largest banks. Government takeovers will likely cost taxpayers more in the end, he said (American Banker April 15). He also noted that governments should practice “first do no harm,” a doctor’s principle ... * WASHINGTON (4/16/09)--If Herbert Allison moves from his post as Fannie Mae CEO to director of the Troubled Asset Relief Program (TARP), it will send a message that the CEO position at Fannie Mae and Freddie Mac is irrelevant, financial observers say (American Banker April 15). From the White House’s perspective, Federal Housing Finance Agency (FHFA) Director James Lockhart runs the enterprises, said Tom Stanton, National Academy of Public Administration fellow. Freddie’s former CEO, David Moffett, left his post because he said he didn’t have enough control over the company. Allison said last month that he controls Fannie's operations but he views FHFA as the controlling shareholder (News Now March 25) ... * WASHINGTON (4/16/09)--Next week, Congress will return from recess, and Sen. Tom Harkin (D-Iowa) plans to place stronger requirements on derivatives trading than those the House Agriculture Committee already has approved. The requirements would essentially ban over-the-counter (OTC) trading. OTC trading uses specialized contracts drawn up for individual counterparties, which prevents the contracts from being brought to a central clearing platform. The trades are recorded and counterparties post capital to the clearing party instead of to each other (American Banker April 15). Some observers say Harkin’s measure is too harsh, noting that other efforts to ban OTC trading already have died in the House. Kathryn Dick, deputy comptroller for credit and market risk at the Office of the Comptroller of the Currency, said there is still a role for customized contracts. She noted that if all contracts had to be cleared, novel products could be constrained. However, Harkin’s spokesman said he would proceed with pushing for the ban ...

Fryzel urges CU action on bill

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ALEXANDRIA, Va. (4/16/09)—National Credit Union Administration (NCUA) Chairman Michael Fryzel Wednesday urged credit unions to support the agency’s legislative plan to replenish the National Credit Union Share Insurance Fund (NCUSIF) over time. In his first speech since the agency placed U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp) into conservatorship in March, Fryzel said he wants credit unions to “roll up their sleeves” and use grassroots activism to promote passage of the NCUA bill. The legislation would allow credit unions to spread the cost of the NCUSIF replenishment over as many as seven years. At issue is the cost to natural person credit unions of recent actions by the NCUA to stabilize the corporate credit union system. Fryzel was addressing the Texas CU League’s annual meeting in Austin. Meanwhile, in Washington, D.C., an NCUA spokesman said the agency is “optimistic” the bill could be passed this spring as part of a broader measure addressing an extension of the higher share and deposit insurance limits approved as part of a stimulus package. In his speech, Fryzel said legislative relief is just part of the agency’s current job right now. “When this stabilization proposal becomes law, our job will not be finished. I have made a commitment to the administration, to Congress, and to you in the industry that NCUA would undertake a broad and comprehensive reform of the corporate system. We have initiated a rulemaking process that I promise will yield results,” he said. Agency staff addressing press questions in Washington reflected their chairman’s remarks. David Marquis, when asked, said the agency’s immediate plans for the corporate credit union system is to maintain liquidity so loans don’t have to be sold and “so we can maintain a level of losses” that are less of a burden on the credit union community. Marquis is NCUA executive director. He said beyond that, NCUA continues work to develop “rule and regulation” for the corporate system that takes on issues “we will have to address going forward.” The agency recently received approximately 450 comment letters responding to its ANPR on corporate credit unions issues. Marquis said the agency is now working to determine what the credit union system in the future will want from the corporate credit unions. He added that beyond that, the NCUA is addressing what needs to be done to address “supervision and safety and soundness changes going forward.”

Interchange interference hits small merchants--CU

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WASHINGTON (4/16/09)—A former chapter director of the Massachusetts Credit Union League told the Boston Herald this week that government intervention in interchange fees would disproportionately harm the nation’s small businesses. Citing conclusions by the Small Business and Entrepreneurship Council, Nicole James said in a letter to the editor that if the government lowers the fees, it would result in lower sales and increased costs for merchants, especially smaller ones. At issue are the fees charged merchants by credit card companies each time a consumer uses the card for a purchase. Opponents of government regulation argue that the fees assist the growth of universal acceptance of cards and the innovation of super-fast authorization technology and enhanced security measures. James, who is president/CEO of MAFCU FCU, Brookline, Mass., was responding in her April 14 letter to a local merchant who complained interchange fees represented “undue profiteering.” She wrote that interchange revenue is gauged, in part, to cover the risk taken on for a transaction and protection from fraud. “If we were not able to cover these costs, we'd be forced to either raise prices for our members or stop offering credit products altogether,” she wrote. Small business owners and elected officials “should not be fooled by the lobbying campaign by big-box retailers who don't want to pay their fair share of the electronic payments system that serves them so well,” James argued.

Inside Washington (04/14/2009)

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* WASHINGTON (4/15/09)--Many homeowners are missing their mortgage payments because they are unemployed, according to a Boston Federal Reserve study (Reuters April 14). Job loss is more likely to cause borrowers to default than tough mortgage terms, the study indicated. Loan modifications may not help investors, either, according to Christopher Foote and Paul Willen, Boston Fed economists; Kristopher Gerardi, Atlanta Fed economist; and Lorenz Goette, University of Geneva professor ... * WASHINGTON (4/15/09)--Suspicious activity reports (SARs) have increased, and the spike may mean an increase in financial crime, according to some financial industry experts. Reports filed by depository institutions in 2008 jumped 13% compared with reports a year earlier (American Banker April 14). Financial institutions are reporting fraud and attempted fraud, said Peter Djinis, former Financial Crimes Enforcement Network (FinCEN) official. A Federal Bureau of Investigation report found that 63,173 SARs involving mortgage fraud were filed in the fiscal year ending Sept. 30. About 28,873 more were filed from October 2008 to February also. As more banks make modifications and work out loans, the more they are checking for fraud. They also fear regulatory criticism, observers said. Last week, the Federal Trade Commission, Treasury, Justice Department, FinCEN and the Department of Housing and Urban Development created a program to stop loan modification fraud ... * WASHINGTON (4/15/09)--The Federal Deposit Insurance Corp. (FDIC) has received about 400 comments from institutions and investors on its Legacy Loan program. Comments ranged from taxpayers’ letters saying they do not support the program, to banking industry representatives who suggested ways to make the program effective. Lawyers at Orrick, Herrington and Sutcliffe LLP suggested broadening the program to include all types of loans, including credit and corporate. Dr. Linus Wilson, a professor at the University of Louisiana at Lafayette, said his research indicates that “it is much better to buy toxic assets from troubled banks after troubled banks have entered a regime similar to receivership than before those bad assets are written down.” Under the current proposal, Wilson said he fears that only banks that sell the assets will be well-capitalized. “Only banks that are insolvent or are experiencing financial distress will see improved operating decisions and better lending incentives if they reduce the volatility of their assets. If this is the case, then U.S. taxpayers will bear the risk of huge losses without improving the incentives in troubled banks.” ... * WASHINGTON (4/15/09)--The Federal Deposit Insurance Corp. (FDIC’s) temporary debt guarantee coverage program has experienced an increase in participation by more than one-third in March. About 97 issuers were participating at the end of last month, compared with 73 in February. Outstanding debt guaranteed by the FDIC also increased 25% to $336 billion (American Banker April 14). The biggest jump in participation was in the category of institutions with assets of less than $10 billion ...

CDFI awards include three credit unions

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WASHINGTON (4/15/09)--Three credit unions have been awarded technical assistance grants from the Community Development Financial Institutions (CDFI) Fund. Express CU, Seattle, Wash., received $99,963; and Union CU, Spokane, Wash., and Kunia FCU, Waipahu, Hawaii, each received $100,000. Twenty-seven organizations received money from the program. A total of $2.3 million will be distributed. The CDFI Fund announced the 2009 Technical Assistance awards in advance of the 2009 Financial Assistance awards, and five months earlier than the award announcement in 2008. “We recognize the economic challenges facing CDFIs, and the growing demand from low-income Americans for the financial services and products they provide,” said Donna J. Gambrell, CDFI director. “In order to expedite the flow of critically needed resources into low-income communities, the CDFI Fund has implemented new operating procedures that have enabled us to expeditiously administer this vital program.” The CDFI Fund intends to make two additional award announcements related to the 2009 round of the CDFI Program--Financial Assistance Component. The first announcement will be made in June, when all $90 million of funding received through the American Recovery and Reinvestment Act of 2009 will be awarded. The second announcement will be made by September, when over $50 million of 2009 annual appropriations will be awarded. Through the Technical Assistance Component of the CDFI Program, the CDFI Fund provides grants to start-up and existing CDFIs, helping them build their organizational capacity to serve their target markets. For a full list of award winners, use the link.

New Market Tax Credit gets innovation award

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WASHINGTON (4/15/09)—The U.S. Treasury Department’s New Market Tax Credit (NMTC) Program is one of the top 50 programs named in the Innovations in American Government Awards Competition by the Ash Institute for Democratic Governance and Innovation at John F. Kennedy School of Government at Harvard University. Credit unions are among those eligible to participate in the NMTC program designed in 2002 to spur the investment of new private sector capital into low-income communities. The program permits individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs). Those investments must be made in designated Community Development Entities (CDEs). The Treasury’s Community Development Financial Institutions (CDFI) Fund allocates the tax credits annually through a competitive application process. Through the first six rounds of the NMTC Program, the CDFI Fund has made 364 awards totaling $19.5 billion in tax credit allocation authority. The CDFI Fund anticipates awarding another $5 billion of allocation authority to CDEs in the fall of 2009, including the additional $1.5 billion in allocation authority authorized through the Economic Recovery Act. The Harvard school of government award, initiated in 1985, is intended to restore “public trust in government by promoting public sector creativity and excellence,” according to the Kennedy School. Competing programs must demonstrate innovative solutions, but may come from within a host of policy areas including health and social services; management and governance; community and economic development; education and training; criminal justice; transportation and infrastructure; and the environment. Use the resource links below for more NMTC information.

NCUA agenda includes Fair Credit items

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ALEXANDRIA, Va. (4/15/09)—The National Credit Union Administration (NCUA) released its seven-item open board meeting agenda for next week, which includes two Fair Credit Reporting Act (FCRA) actions. The agency is expected to issue a final rule and guidelines regarding the accuracy and integrity of information furnished to consumer reporting agencies, the so-called “accuracy regulations.” The final reg also will address consumers' direct disputes with furnishers of credit report information. The proposal was first issued jointly by the NCUA and the Federal Trade Commission (FTC) in 2007, and other agencies were required to develop rules under provisions of the Fair and Accurate Credit Transactions (FACT) Act. The NCUA will also vote whether to issue an Advance Notice of Proposed Rulemaking, seeking further comment on the definition of "integrity" under this provision of the FCRA, and what standards would make a credit report have integrity. Also on the April 21 agenda, the NCUA will propose clarifications and staff interpretations to Part 706 of the Unfair and Deceptive Practices rules. No major changes are anticipated; the NCUA will be renumbering some sections, providing clarification on deferred interest rate programs, and examples in the staff interpretation. The proposed rule will also clarify that the regulation does not preempt the federal Servicemembers Civil Relief Act. A 30-day comment period is likely. Also on the agenda:
* Delegations of Authority, Office of Small Credit Union Initiatives; * Creditor Claim Appeal; * Budget, Office of Capital Markets and Planning and Central Liquidity Facility; and * The monthly National Credit Union Share Insurance Fund report.

Bernanke cites tentative signs that decline is slowing

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WASHINGTON (4/15/09)—In a speech that primarily addressed aspects of the country’s current financial struggles, Federal Reserve Board Chairman Ben Bernanke also declared that he is “fundamentally optimistic” about the economy. Bernanke, addressing students and faculty at Morehouse College, Atlanta, acknowledged that the current crisis has been “one of the most difficult financial and economic episodes in modern history.” However, in his conclusion he noted recent, “tentative” signs that the sharp drop in economic activity may be slowing. He cited recent data on home sales, homebuilding, and consumer spending, as indicative of a leveling out of economic activity marking “the first step toward recovery.” “To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets. We are making progress on that front as well, and the Federal Reserve is committed to working to restore financial stability as a necessary step toward full economic recovery,” he stated. He added, “I am fundamentally optimistic about our economy.” Use the resource link below to access the Fed chairman’s speech.

Inside Washington (04/13/2009)

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* WASHINGTON (4/14/09)--Insolvent financial institutions should be resolved like failed banks have been in the past, Federal Reserve Bank of Kansas City President Thomas Hoenig said Thursday (American Banker April 13). The government has recapitalized banks with private money, which has not helped, he said. Old methods that have helped failed banks in the past could stabilize some institutions. However, a large failed firm would need to be operated as a conservatorship or a bridge organization, he added ... * WASHINGTON (4/14/09)--Social Security benefits for thousands of people with disabilities are being delayed because of state employee layoffs and furloughs, according to Michael J. Astrue, Social Security commissioner (The New York Times April 13). Laying off employees or giving them furloughs does not save states any money, he said. It just delays payments to the disabled, who rely on the funds. The Social Security Administration anticipates that disability claims will rise to more than three million this year, compared with 2.6 million last year. The agency pays $12 billion per month to more than 13 million people ... * WASHINGTON (4/14/09)--Private student lenders and their congressional allies are trying to offset President Barack Obama’s plan to eliminate a subsidized loan program and put the money into scholarships for low-income students (The New York Times April 13). The Congressional Budget Office says the plan would save $94 billion and broaden Pell grants for poor students. Republicans say the plan indicates that the president is trying to expand the government. Democrats are split on the issue. The private loan industry was rescued last year and has begun fighting the plan, saying that the Obama administration is trying to collect profits from federal student loans ...

CDFI certification info sessions start this week

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WASHINGTON (4/14/09)—Credit unions interested in Community Development Financial Institution (CDFI) certification should note the U.S. Treasury Department will be conducting a series of conference calls on the subject. The information sessions, starting this week, are intended to provide a forum for credit unions and other potential CDFI applicants to ask questions directly of CDFI Fund staff about becoming certified. The Treasury Department's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. CDFIs are financial intermediaries such as certain credit unions, banks, loan funds, venture capital funds, corporation-based lenders and microenterprise development loan funds. To become certified, Treasury says an organization must: be a legal entity, have an eligible primary mission, be a financing entity, serve an eligible target market, be accountable to the target market, provide corresponding development services, and not be controlled by a government entity. Among other benefits, CDFI certification allows participants to apply for financial assistance through the CDFI Program. The 60-minute information sessions are scheduled for:
* April 16 at 2 p.m. EST; * May 21, 2 p.m. EST; * June 18, 2 p.m. EST; and * July 16, 2 p.m. EST.
To access any of the conference calls, participants must call (202) 927-2255 and enter in the pin number 315646. No prior registration is necessary. The phone number and pin number are the same for all of the conference calls. Use the resource link below for more information about CDFI certification eligibility and the application process.

Land acquisition flexibility effective April 27

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WASHINGTON (4/14/09)—The Credit Union National Association (CUNA) reminds credit unions that they have increased flexibility as of April 27 with regard to acquiring unimproved land for future expansion. Under a rule adopted by the National Credit Union Administration last month, RegFlex-qualifying federal credit unions will have up to six years to occupy unimproved land acquired for expansion, without a waiver. Previously, a RegFlex credit union minimally had to partially occupy the premises within three years or it was required to obtain a waiver from NCUA. In a recently released final rule analysis, CUNA underscores that the rule applies only to unimproved land. The NCUA has said it made the rule change to recognize that "real estate transactions are complex, time consuming, and can involve a host of wide-ranging issues . . . [t]his is especially true in the unimproved land context considering the addition of construction-related issues." A federally insured credit union automatically qualifies for RegFlex classification under 12 C.F.R. part 742 if it has had a composite CAMEL rating of 1 or 2 for its last two examinations and has been "well capitalized" under NCUA rules for the previous six quarters. Use the resource link below to read CUNA’s rule analysis.

Inside Washington (04/10/2009)

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* WASHINGTON (4/13/09)--Senate Democrats are working to cut down on a packed legislative agenda by dropping legislation that doesn’t have enough support to pass (CongressDaily PM April 9). If some of the legislation is dropped, there will be more time for the Senate to focus more intently on other issues. The Senate’s legislative agenda could focus on revamping financial regulation, according to aides. The Senate is scheduled to reconvene April 20 ... * WASHINGTON (4/13/09)--The Treasury and Vice President Joe Biden are encouraging federal benefit recipients to switch to direct deposit from paper checks by April 20. By doing so, senior citizens, the disabled and others can ensure they will receive their $250 Economic Recovery payment. The Treasury will issue more than 64 million of the $250 payments, and about 80% will be electronic. The announcement is part of an ongoing effort by Treasury to switch all federal benefit recipients to direct deposit, saving taxpayers $130 million annually. The Treasury and the Federal Reserve Banks are sponsoring GoDirect, a campaign to motivate those receiving federal benefit checks to use direct deposits. The Credit Union National Association is a national GoDirect partner and supports the goals of direct deposit ...

FinCEN SARs can help detect mortgage-help scams

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WASHINGTON (4/13/09)--The Financial Crimes Enforcement Network (FinCEN) is asking credit unions and other Suspicious Activity Report (SAR) filers to help identify schemers taking advantage of homeowners with mortgage difficulties, so law enforcement can crack down. FinCEN issued guidance last week on potential indicators that financial institutions can be on the look out for regarding loan-modification or foreclosure-rescue scams. On February 10th, U.S. Treasury Secretary Timothy Geithner outlined Treasury's comprehensive Financial Stability Plan, which includes a Home Affordable Refinance Program and a Home Affordable Modification Program. FinCEN said that with the introduction of these new programs, more homeowners facing difficulty meeting the mortgage obligations have the opportunity to modify their mortgages and avoid foreclosure. However, along with the positive comes a growing negative, FinCEN warned, as growing numbers of unscrupulous persons or companies could attempt to abuse these loan modification and foreclosure prevention programs. FinCEN, in its recent SARs guidance, asks financial institutions to be on the look out for such things as a statement by a homeowner that s/he has been making payments to a party other than the mortgage holder or servicer. If a homeowner says that s/he has hired a third party, perhaps advertised as a "foreclosure specialist" or "mortgage specialist," it may be suspicious, FinCEN said, if the homeowner indicates that the third party did such things as:
* Charge up-front fees for foreclosure rescue or loan modification services; * Accept up-front payment only by official check, cashier's check or wire transfer; * Use aggressive tactics to seek out the homeowner by telephone, e-mail, mail or in person; * Pressure the homeowner to sign paperwork he/she didn't have an opportunity to read thoroughly or that he/she didn't understand; * “Guarantee” to save the home from foreclosure or stop the foreclosure process "no matter what;" * Claims the process will be quick with relatively little information and paperwork required from the homeowner; and more.
FinCEN said it will continue to monitor Suspicious Activity Reports that identify mortgage loan fraud, and specifically loan modification and foreclosure rescue scams, in order to provide future analysis and ways to mitigate losses to financial institutions and consumers. FinCEN will issue further advisories on this issue “as appropriate” Use the resource link below to read more about the FinCEN SAR guidance.

NCUA provides deeper info on corporate analysis

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ALEXANDRIA, Va. (4/13/09)—National Credit Union Administration (NCUA) Chairman Michael Fryzel Friday released a summary of the agency’s analysis of the distressed securities held by U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp). In what was the NCUA’s third weekly update on corporate credit unions, the chairman noted that the “incomplete or insufficient nature” of available information on the agency’s action addressing corporate credit union stabilization has “led some to question the necessity of the NCUA’s actions and level of expected credit losses being projected.” In fact, the Credit Union National Association (CUNA) has repeatedly requested more information regarding NCUA’s corporate stabilization actions and filed a formal Freedom of Information Act (FOIA) in March. The agency has 20 days from the March 30 request date to respond, but extensions to that deadline are possible. Fryzel said the portfolio outlines released Friday and the NCUA’s associated summary analysis provides a “concise synopsis of the respective portfolios and enables informed parties to appreciate the scope and severity of the stress on these investments.” “Though virtually all of the securities purchased by these two corporate credit unions were AAA- or AA-rated at the time of purchase, the summary clearly demonstrates how the nature of the securities and the deterioration in the economy have resulted in significant expected credit losses. In the near future NCUA will also be releasing a summary of the PIMCO report,” Fryzel said. The chairman added that the agency also will be addressing the “many questions” surrounding how member credit unions will account for any impairment or write-down of paid-in-capital and membership capital accounts at corporate credit unions. The NCUA, Fryzel promised, will be issuing guidance next week on this subject. Use the resource link below to access the NCUA weekly summary and for CUNA's comprehensive reource on corporate credit union issues.

State-chartered CU red flags date is May 1

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WASHINGTON (4/13/09)—Time is almost up for state-chartered credit unions to comply with the Federal Trade Commission’s identity theft “red flags” rule. The FTC effective date is May 1. Last October, state-chartereds got a bit of a compliance reprieve when the FTC postponed its effective date because of concern that some entities under its jurisdiction—such as automobile dealers and utility companies--were unaware that the rule applied to them as well as to financial institutions. The National Credit Union Administration and the federal banking agencies required compliance on Nov. 1, 2008. This month, the FTC launched a website to help entities covered by the red flags rule develop and implement identity theft prevention programs. The website features an online publication called “Fighting Fraud with the Red Flags Rule: A How-To Guide for Business.” The website also offers articles and guidance on specific elements of the rule. The red flags rule was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. Under the rule, financial institutions and creditors with covered accounts must have identity theft prevention programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft.

Inside Washington (04/09/2009)

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* WASHINGTON (4/10/09)--Evidence of Treasury’s success or failure to help solve the financial crisis is mixed, according to Elizabeth Warren, chair of the Congressional Oversight Panel. The panel has released its April Oversight Report, “Assessing Troubled Asset Relief Program (TARP) Strategy.” The report comes out six months after TARP was created under the Emergency Economic Stabilization Act of 2008. Treasury has spent or committed $590.4 billion in TARP funds in the past six months, and has relied on the Federal Reserve’s balance sheet--which has expanded by more than $1 trillion, the report said. The Treasury’s outlook on the crisis focuses on banks’ problems as temporary--and fails to acknowledge that the crisis may be deeper, Warren said. “Treasury’s efforts to date could be enough, but we will continue to press them,” she said ... * WASHINGTON (4/10/09)--The Obama administration is encouraging large investment companies to establish bailout funds--similar to war bonds, which were created during World War I to help soldiers (The New York Times April 9). The theory behind the bailout funds is that they would purchase troubled securities from banks, helping lenders make loans to stabilize the economy. The funds could eventually be sold to garner a profit. However, analysts say investors could lose money if banks’ assets aren’t worth as much as investors thought. The funds, which are currently under discussion, would not be created for several months if the plans are approved ... * WASHINGTON (4/10/09)--The banking industry is in better shape than some think, according to federal examiners who spent the last eight weeks stress-testing institutions to see how they would fare if the recession gets worse (The New York Times April 9). Though some banks are holding up in the tests--regulators say 19 of the banks being examined will pass--the nation’s largest lenders may need a bailout. Citigroup, JPMorgan Chase and others are expected to report their first-quarter results soon. Though the results could indicate that the banks are bouncing back, the banks also could report large losses on real estate and corporate loans, and credit cards ... * WASHINGTON (4/10/09)--The Federal Deposit Insurance Corp. (FDIC) Thursday was scheduled to offer a second conference all for investors interested in participating in its Legacy Loans program (American Banker April 9). The first call attracted 2,700 participants. The Legacy Loans Program aims to attract private capital through an FDIC debt guarantee and Treasury equity co-investment ...

CU comment wanted on operating fee plan

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WASHINGTON (4/10/09)—The National Credit Union Administration’s (NCUA) plan to exclude investments in CU SIP or CU HARP from a credit union’s calculation of its operating fee is intended to encourage investment in those programs. The Credit Union National Association (CUNA) is asking credit unions to comment on whether there might be any hidden drawbacks to the proposal. The Federal Credit Union Act requires a federal credit union to pay an annual operating fee to the NCUA, but the agency has discretion in defining how the fee is determined. Under the NCUA’s current formula, there is a direct correlation between the amount of a credit union’s investments and its operating fee. The NCUA established CU SIP, or the Credit Union System Investment Program (CU SIP), and CU HARP, or the Credit Union Homeowners Affordability Relief Program, late last year as part of its effort to stabilize the corporate credit union system. Under CU SIP, credit unions borrow from the Central Liquidity Facility (CLF) and then invest those proceeds in a corporate credit union. Under CU HARP, credit unions borrow from the CLF and then invest those proceeds in a two-year guaranteed CU HARP note issued by a corporate credit union. CU HARP funds are used to modify mortgages at risk of default. The NCUA has encouraged credit unions to participate in both CU SIP and CU HARP. However, the agency said in March it is concerned that since investments in both these programs result in increased operating fees, some credit unions will refrain from participating. The agency will accept comments on its proposal until May 4. CUNA requests credit union comment by April 21. In addition to identifying any unintended consequences that could occur under the proposal, CUNA also asks for credit union comment on any other changes that could help increase CU SIP and CU HARP participation. Use the resource link to read the CUNA comment call.

More accounting guidance sent to NCUA examiners

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WASHINGTON (4/10/09)—National Credit Union Administration (NCUA) examiners received additional clarification today regarding credit unions' flexibility in booking the National Credit Union Share Insurance Fund (NCUSIF) deposit impairment, according to NCUA. The agency wants to ensure that its field staff is consistent with advice to credit unions that they have some flexibility in deciding whether to book the impairment of the NCUSIF deposit on their March 31 statements. The newest guidance addresses the recently released Accounting Bulletin (AB 09-02) and subsequent memo to field staff on accounting for the insurance costs associated with NCUA Corporate Stabilization Plan. According to Mary Dunn, Credit Union National Association (CUNA) deputy general counsel, the newest communication clarifies that for any credit union using the accrual basis of accounting, examiners should not take exception with either of the following decisions:
* If the credit union records the deposit impairment and premium expense consistent with the guidance in AB 09-2; or * If the credit union accounts for the deposit impairment and premium expense (including not recording them at all) in accordance with written guidance from a licensed practitioner that states the guidance is consistent with generally accepted accounting principles—or GAAP.
Even if a credit union delays booking the impairment of the NCUSIF deposit without guidance from a licensed practitioner, Dunn said Thursday, the NCUA has indicated that examiners are directed not to take harsh action. They should instead note such action as an exception under "Informal Discussion Item" or at most an "Examiner's Finding" on the credit union's examination report. CUNA will continue to work with the NCUA as corporate credit union issues continue to develop.

Inside Washington (04/08/2009)

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* WASHINGTON (4/9/09)--Rep. Edolphus Towns (D-N.Y.) warned Treasury Secretary Timothy Geithner that the department must follow restrictions on executive pay for companies that receive funds from the Troubled Asset Relief Program ( April 7). On Saturday, the Washington Post reported that the Treasury was creating special entities to provide funds to banks and companies, Politico said. Towns told Geithner that he opposes any attempt to bypass the pay restrictions. Towns is the chair of the House Committee on Oversight and Government Reform ... * WASHINGTON (4/9/09)--The Federal Housing Administration (FHA), expecting to see a 30% increase in the industry’s volume this year, said it will automate mortgages. The FHA said it has prepared a draft for electronic mortgage signature specifications and will pilot the program (American Banker April 7). Financial industry observers questioned whether adopting the new process would be hard for lenders, but Kim Weaver, vice president of product management for Fiserv, disagreed. FHA will create useable standards, she said. Weaver also said she expects the FHA will act quickly on the automation. Brookfield, Wis.-based Fiserv is a core processor and provider of electronic lending applications for financial institutions, including credit unions ... * WASHINGTON (4/9/09)--Sixty-one housing agencies with poor records of handling government aid will receive more than $300 million in stimulus funds, USA Today reported Wednesday. The stimulus funds aim to create jobs by repairing public housing projects. The newspaper found that the 61 agencies have been challenged for mishandling of government funds with three or more audits since January 2004. Watchdog groups, such as the Citizens Against Government Waste, said taxpayers would have to “steel themselves” if they hear the money goes to waste. The Obama administration was allowed to withhold stimulus funds from agencies listed as “troubled” by the Department of Housing and Urban Development (HUD), but HUD provided money to the agencies because they should receive an opportunity to improve housing, said a HUD spokesman ... * WASHINGTON (4/9/09)--The Treasury is providing support to automakers to help them overcome an industry slump. General Motors will receive $2 billion under the program and Chrysler LLC will receive $1.5 billion. The funds will help stabilize the companies, said Jenni Engebretsen, Treasury spokesman. Originally, $5 billion was available for any U.S. automaker who wanted to participate in the program. Ford declined to participate ...

USDA study defines economic value of CUs coops

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WASHINGTON (4/9/09)—In a first-ever government study of the economic impact of cooperatives in the United States, the U.S. Department of Agriculture (USDA) said the billions of dollars in assets and paid in wages, and the millions of job opportunities provided, tell only a part of the value story. The other part of the story, the report’s executive summary pointed
Click to view larger image Source: USDA report: Research on the Economic Impact of Cooperatives
out, involves complex issues that stem from the fact that cooperative firms are “fundamentally different from other forms of business organization.” “Assessment of economic impact solely in terms of the magnitude of business activity provides an incomplete perspective on the total impact of cooperatives.” The USDA said it will study the more complex economic benefits, as well as social benefits, in a future series of eight discussion papers to explore these “deeper issues.” However, its initial report unveiled this week noted some interesting facts about credit unions:
* The country’s 8,344 credit unions account for about $760B in assets; * There are nearly 100 million credit union memberships, representing approximately one-third of the population; and * Adding indirect and induced impacts, credit unions account for close to $75 billion in revenue, close to 500,000 jobs, $20 billion in wages paid, and somewhat less than $42 billion in valued-added income.
USDA noted that credit unions resemble banks in the financial products and services they offer, but underscored that credit unions are very different from banks. “(Credit unions) have several distinctive legal differences: they are not-for-profit cooperatives with an IRS tax exemption status. “They return earnings to their membership in the form of reduced fee (interest) on loans and increased interest (dividends) on deposits, or they may re-invest earnings into the credit union,” the report noted. According to Bill Hampel, chief economist of the Credit Union National Association (CUNA), that savings on products and services equals approximately $9 billion a year, when compared to the rates and fees consumers would pay and earn at banking institutions. More broadly, the USDA study reported that in the U.S., nearly 30,000 cooperatives operate at 73,000 places of business. They own something less than $3 trillion in assets, and generate nearly $500 billion in revenue and $25 billion in wages. The USDA said if extrapolated to the entire population, the study estimates that cooperatives account for nearly $654 billion in revenue, almost 2 million jobs, $75 billion in wages and benefits paid, and a total of $133.5 billion in value-added income. USDA's Rural Development received a $1.5 million congressional appropriation to develop the project in conjunction with the University of Wisconsin-Madison, the National Cooperative Business Association and other private-sector associations. The NCBA Wednesday called the release of the report a “definitive moment for all cooperatives.” A spokesman said NCBA now anticipates the data produced will support the position that cooperatives are “the better business model when it comes to making economic and social change.” “Cooperatives give consumers and the general public services and products they need at reasonable prices while retaining any 'profits' in the community in which the co-op operates,” the NCBA spokesman said. He added, “Knowing that credit unions account for the largest number of firms, establishments, memberships, and employees, they can use this data to educate consumers about the sustainable power of our model."

Oral arguments delivered in direct deposit case

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WASHINGTON (4/9/09)—The California Supreme Court this week heard oral arguments in Miller v Bank of America (BofA), a case to determine whether overdraft fees can be assessed in California by federally chartered depository institutions against Social Security (SS) funds in a checking account. The lawsuit has broad implications for California credit unions, credit unions doing business in the state, and for direct deposits. Oral arguments were presented on April 7th and the court should issue a decision within 90 days. The case has been winding its way through the California courts for years, and ended up before the state supreme court under appeal by the plaintiff. BofA has argued that federal law and regulation preempt a California law that prohibits tapping SS money in an account. However, in December 2004 a judge for the Superior Court of San Francisco upheld an over-$1 billion-dollar jury award against BofA for violating state law. That court found that the bank's practice of using customers' funds from accounts that may contain SS funds to pay checking account overdrafts and insufficient funds fees violated the California Unfair Business Practices Act. However, in November 2006, a California Court of Appeals reversed the lower court's ruling and award, and decided in favor of BofA. The plaintiff, Paul Miller, then filed an appeal with the California Supreme Court, which agreed to hear the case. During the oral arguments this week, a U.S. Justice Department attorney made a statement on behalf of the Office of the Comptroller of the Currency (OCC), U.S. Treasury Department, and the Social Security Administration. The government lawyer reiterated that a decision in favor of the plaintiff, Miller, would threaten federal policy by making banks less willing to extend banking privileges to recipients of directly deposited public benefits. The government attorney emphasized the additional cost the government would incur if it had to provide benefits by mailed checks instead of by direct deposit. He also argued in favor of preemption under the OCC regulations, stating that “account balancing” is not the same as “debt collection” and, therefore, not within the savings clause of the regulation. The Credit Union National Association and banking associations joined the case in 2007 through amicus briefs that argued banks and federal credit unions are not subject to the court's ruling because of the prevention provisions in the National Bank Act, Office of the Comptroller of the Currency (OCC) regulations, and the Federal Credit Union Act.

Online resources available for Obama loan mod program

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WASHINGTON (4/9/09)—Credit unions and other lenders interested in participating in the Obama administration’s loan modification program should be aware of important online resources available to them, noted Jeffrey Bloch, Credit Union National Association (CUNA) senior assistant general counsel. Bloch, who organized last week’s audio call on the administration’s new Making Homes Affordable Program, noted that the program provides a number of incentives for all parties involved, including lenders, servicers, and borrowers. Also, holders of second mortgages may be given incentives to give up their lien positions. However, Bloch said, details of these incentives have not yet been made public. The speakers on the audio conference call included representatives from the U.S. Treasury Department, Freddie Mac, and Fannie Mae, all of whom gave a detailed overview of the program. Important points included:
* The program is voluntary for loans held in portfolio, however, servicers are required to participate for those loans owned or secured by Freddie Mac and Fannie Mae; * Fannie Mae has been designated the “financial agent” and will be manage the program with the Treasury Department; and * To participate in the modification program, lenders and servicers must execute an agreement with Fannie Mae and the agreements soon will be Fannie Mae’s website.
The Obama program has two main components. One is a refinance option, under which borrowers who are current on their mortgages may refinance their loan if it is owned or secured by Freddie Mac or Fannie Mae. The balance cannot be more than 105% of the home’s market value. The other part is a modification program in which a borrower who is not current on their mortgage may have an opportunity to modify his or her loan in order to lower the payments. Bloch said both Freddie and Fannie have substantial roles in both the refinance and modification programs and have posted extensive information on their websites, along with training opportunities. (Use resource links below.) “Credit unions will want to check both the Fannie and Freddie websites often for the latest information, especially since the requirements for Fannie Mae and Freddie Mac loans will vary somewhat,” Bloch advised. “Fannie Mae has also shared with us email addresses and phone numbers that credit unions may use if they have specific questions,” he added. For loans owned by Fannie Mae or Freddie Mac, call 1-888-326-6435 or send an email to For other loans, call 1-866-939-4469 or send an email to Use resource links below.

Inside Washington (04/07/2009)

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* WASHINGTON (4/8/09)--On Tuesday, The New York Times published an obituary for Ed Callahan, former National Credit Union Administration chair and president/CEO of Patelco CU, San Francisco. Dan Mica, Credit Union National Association president/CEO, was quoted in the article. “Ed Callahan largely shaped the credit union system as we now know it,” Mica said. “Ed Callahan knew that we had to have solid, stable institutions. He knew we needed proper capitalization of the insurance fund, and he tried to minimize unnecessary regulations” ... * WASHINGTON (4/8/09)--Financial observers say that the Federal Deposit Insurance Corp.’s (FDIC) involvement in rescuing the financial sector may be compromising its mission. The FDIC’s borrowing power is set to triple, it has guaranteed $335 billion of debt incurred by banks and holding companies, and it could be given oversight of systemically significant nonbanks (American Banker April 7). The changes could compromise the agency’s independence and dilute its mission to protect deposits, observers said. Rep. Michael Capuano (D-Mass.) said in a March hearing that the FDIC’s role as a purchaser of toxic assets is jeopardizing the fund. However, some FDIC officials say the agency is ready to take on new responsibilities because it has a history of managing troubled assets and has experience from dealing with the savings and loan crisis ... * WASHINGTON (4/8/09)--The U.S. economy is in a state of panic, Federal Reserve Board Gov. Kevin Warsh said in a speech this week. The panic is the result of faulty private practices and flawed public policies. “Panics involve losses of confidence in the financial system, when even sound firms find it difficult to borrow. Panics are threatening to economic well-being. Panics take even less kindly to, and often result from, uncertainty. And panics place a greater burden on the deftness of policy responses than recessions alone,” Warsh said. “Financial stability demands policy stability--and policy preferences must be communicated clearly, credibly, and consistently and backed by concrete action,” he concluded ... * WASHINGTON (4/8/09)--The Treasury this week released additional guidance for potential investors in the securities portion of the Public Private Investment Program. The guidance extends the deadline for applying to the program to April 24. Treasury expects to inform applicants regarding preliminary qualification on or before May 15. Applications should be e-mailed. The program’s goal is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit. It also seeks to maximize the inflow of private capital into the market while protecting taxpayers ...

Mica--Include CUs in Treasury capital assistance for mutuals

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WASHINGTON (4/8/09)--Credit unions should be included in the Treasury’s capital assistance program for mutual financial institutions, the Credit Union National Association (CUNA) said in a letter to Treasury Secretary Timothy Geithner Monday. A recent letter sent to Geithner by Rep. Barney Frank (D-Mass.) and nine members of Congress indicates that the Treasury could begin drafting standards for the program. CUNA President/CEO Dan Mica urged Geithner to work with the National Credit Union Administration (NCUA) to ensure that credit unions can access the capital assistance. NCUA Chairman Michael Fryzel wrote to Geithner on Jan. 27 asking that federally insured credit unions be given access to Troubled Asset Relief Program funds. CUNA wrote former Treasury Secretary Henry Paulson and Interim Assistant Secretary Neel Kashkari with similar concerns. “Since the sending of these letters, credit unions’ need for access to TARP funds has become crystal clear,” Mica wrote. “Credit unions did not contribute to the subprime crisis. But in those areas of the country where housing prices have suffered major declines, and where unemployment has spiked, otherwise healthy credit unions are suffering an erosion of their capital that reduces their ability to make new loans.” Mica invited Geithner to meet with him to discuss assistance and noted that CUNA continues to talk with NCUA and offices on Capitol Hill about these issues. Mica added that there has been "clear congressional intent that smaller, mutually structured institutions such as not-for-profit credit unions be given access to TARP (or Financial Stability Plan) capital programs on terms comparable to those offered to for-profit banks."

NASCUS Tighten regulatory standards for corporates

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ARLINGTON, Va. (4/8/09)--The National Credit Union Administration (NCUA) should enhance supervision, tighten regulatory standards for the corporate system and assess risk problems before addressing structural changes, the National Association of State Credit Union Supervisors (NASCUS) said in a comment letter Friday. NASCUS filed comments regarding NCUA’s Advanced Notice of Proposed Rulemaking on Part 704, Corporate Credit Unions. NASCUS urged NCUA to:
* Resist a rush to judgment on restructuring the corporate credit union system; * Explore if a lack of proper application of regulation and oversight contributed to the current events; * Avoid labeling all credit unions as unsophisticated by unilaterally declaring some activities as too complicated and risky for any credit union; and * Preserve equal opportunity for all corporates to compete so long as they remain safe and sound and retain member support.
NCUA should find what flaws exist in the corporate system and request that the NCUA Office of the Inspector General perform a material loss review, the state regulators’ group said. The agency also should discuss with state regulators how regulatory systems can improve oversight, identify systemic risk factors, and create an examination team of state and federal regulators to concentrate on systemic risk in the corporate system, NASCUS said. NASCUS cautioned against regulation that would unnecessarily or negatively impact safe and sound corporate credit unions that have properly managed their investments and remain fully supported by their members.

NCUA receives 450 comments on ANPR for corporates

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ALEXANDRIA, Va. (4/8/09)--The National Credit Union Administration (NCUA) received 450 comments on its advance notice of proposed rulemaking (ANPR) regarding the corporate credit union system and its regulation. NCUA is evaluating corporates’ role in the credit union system--including their membership, structure, size and services. NCUA also is considering whether to amend Part 704, the corporate credit union regulation, to clarify or revise provisions that include capital, permissible investments, management of credit risk and liquidity, and corporate governance. The initial response to NCUA’s request for comments was positive, according to NCUA Chairman Michael Fryzel. “This process will be a careful and deliberate one, especially given the broad scope and complexity of the issues before us. At the same time, I intend to move forward with all appropriate speed and diligence,” he said. “The corporate situation warrants a new set of rules that will facilitate the creation of a safer, stronger, and more financially viable network of corporate credit unions, and NCUA must take a wide-ranging look at all options and then act decisively.” The Credit Union National Association (CUNA) and the Corporate Credit Union Task Force encouraged credit unions to share their views with NCUA on the issues raised by the ANPR. “We are glad that a number of credit union folks took time to consider these matters and put their comments together; the input can only help the process,” said task force Chair Terry West. “CUNA will be reviewing the comments carefully and continue to talk with NCUA to help ensure the interests of natural person credit unions are foremost as NCUA considers changes to the corporate credit union system.” To see the ANPR and comments, use the link.

Limited services smaller numbers among CUNA recommendations

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WASHINGTON (4/7/09)--A revamped corporate credit union system would be most effective if it offered limited services (leading to reduction in the number of corporates), served a national field of membership, met stronger capital requirements, and included a prescribed number of “outside directors” who could “contribute diverse experiences” to a corporate’s board, the Credit Union National Association (CUNA) has written in a comment letter to the National Credit Union Administration (NCUA). In its letter to NCUA on the agency’s “advance notice of proposed rulemaking” (ANPR) on corporate credit unions, signed by CUNA President/CEO Dan Mica and Terry West, chairman of CUNA’s Corporate Task Force (and president/CEO of Vystar CU, Jacksonville, Fla.), CUNA acknowledged that the NCUA Board must first deal with stabilizing the corporate credit union system, and then make a transition to a revised system. However, when the time to make revisions comes, CUNA suggested several major changes:
* Corporate credit unions should focus on core services of settlement, payment systems and meeting short-term investment and liquidity needs of member credit unions. Corporates’ investment authority should be carefully reviewed and concentrations in long-term, on-balance sheet investments should not be permitted, due to the past inability of corporates to reasonably manage or mitigate risk in these areas. * The two-tier system of U.S. Central and many corporates has outlived its utility. Additionally, characteristics of that system that facilitated undue risk taking, reduced credit unions’ capital and created inefficiencies must be eliminated. The appropriate number of corporates in the future will depend on the primary functions and services that corporates will be allowed to provide. “Processing payments and handling settlements are scale businesses, so the number of corporate credit unions can be sharply reduced to a very small number,” the letter states. “With only a few, large corporate credit unions serving natural person credit unions, there would no longer be the need for a two-tiered system.” * With a small number of corporates operating in the future, each should have a national field of membership, which would foster competition and thus innovation. (However, CUNA wrote, it “understands that competition among corporate credit unions may have in the past contributed to thinly capitalized institutions, operating on very low margins taking significant risks.” CUNA noted, however, that with “sufficient capital requirements and with investments restricted to only those necessary to perform short-term investing and liquidity,” competition among the corporates would better serve credit unions “in a context of full safety and soundness.” * Tier 1 capital requirements should be at least 4% and could be as high as 6% (over a reasonable period of time). Risk-based capital should also be required, and natural person credit unions that use corporates should be required to “maintain contributed capital in their corporate.” The CUNA letter noted that “if NCUA chooses to institute risk-based capital requirements for corporate credit unions, such risk-based capital should be comparable to those applicable to similarly situated Federal Deposit Insurance Corp. (FDIC)-insured depository institutions.” However, if NCUA adopts CUNA’s recommendations for limits on corporate business and investment activities, “risk-based requirements are likely unnecessary.” * Corporates should be permitted to have outside, non-member directors who can “contribute diverse experiences to a corporate credit union’s board,” CUNA wrote. Further, up to 20% of “non-member” board members should be permitted (if the members agree), and these members should earn a “reasonable director’s fee.”
In other points raised in the letter, CUNA called it “imperative” that NCUA take additional steps to assure credit unions that it will not sell securities of U.S. Central and Western Corporate (WesCorp) FCUs “prior to almost complete amortization.” The only caveat CUNA suggested: If NCUA can work with the U.S. Treasury Department to obtain a favorable price well above the current market value for the securities before they mature. CUNA also used the comment letter as an opportunity to review the impact of NCUA’s corporate stabilization program on credit unions, noting the high costs. Along those lines, CUNA stated it will “continue to do all we can to attain a better outcome for credit unions than the current situation, including through assistance from the U.S. Treasury.” CUNA commended the NCUA Board for its announcement late last week to make more information from the PIMCO report available to the credit union system. While CUNA said it "appreciates the latest agency memo to examiners" that credit unions have some flexibility in delaying the reporting of the impairment of the NCUSIF deposit, issues relating to the reporting of the impairment of corporate credit union capital have not been resolved because the estimates of the losses from U.S. Central and WesCorp are still under review. CUNA indicated it wants to work with NCUA to provide clarify to credit unions on the accounting issues. For the full letter, use the resource link.

NCUA memo guides on delaying NCUSIF write-downs

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WASHINGTON (4/7/09)—In a memo Friday to regional directors and examiners, shared with the Credit Union National Association (CUNA), the National Credit Union Administration (NCUA) is providing guidance to field staff on an accounting bulletin (AB 09-02) released earlier in the week addressing corporate credit union issues. The memo is an effort to clear up confusion created by the accounting bulletin on whether credit unions may delay reporting the write-down of their 1% National Credit Union Share Insurance Fund (NCUSIF) deposit. The NCUA memo says credit unions should follow the accounting bulletin and book the impairment as of March 31. It also indicates that credit unions may be able to delay reporting the impairment, if their accountant determines the delay is consistent with GAAP and provides guidance to the credit union to that effect. However, it is CUNA's understanding that even without written guidance from an accountant, examiners are being instructed not to deal harshly with a credit union that delays the write-down. CUNA is working with NCUA to get further clarification on this matter.

Inside Washington (04/06/2009)

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* WASHINGTON (4/7/09)--The Department of Housing and Urban Development (HUD) announced Monday that it will crack down on foreclosure rescue scams and loan modification fraud, and will send lender “swat teams” to reduce fraud and risk among lenders working with the Federal Housing Administration (FHA). During a hearing last week, HUD Secretary Shaun Donovan said he will dispatch teams of investigators to conduct on-site reviews of lenders, especially those whose refinance portfolios indicate distress or unusually high default rates. Donovan also asked Congress for additional funds next year for more FHA staff to handle the surge in loan activity. FHA’s role has grown to overseeing 30% of all lending activity, up from 3% in 2006. HUD, the Treasury, the Department of Justice, the Federal Trade Commission and the Illinois state attorney general also discussed initiatives to coordinate information and resources across agencies to combat fraud ... * WASHINGTON (4/7/09)--Two Senate votes last week indicate that lawmakers do not strongly support the Federal Reserve Board as a top candidate to oversee systemically significant institutions (American Banker April 6). The amendments would require the central bank to disclose more information about its liquidity facility and lending efforts, including recipients of funds through its discount window. The votes signal that Congress will not grant the Fed more power, according to Sen. Jim Bunning (R-Ky.), who co-sponsored one amendment the Senate approved. The Fed is not independent and is acting like an arm of the Treasury Department by helping Treasury to get around asking Congress for money, he said. The votes show that the Senate is going to demand more accountability from the Fed ... * WASHINGTON (4/7/09)--Last week, the Group of 20 met in London and agreed that rules governing executive compensation would be applied to foreign and domestic banks--even if they have not received government taxpayer assistance (American Banker April 6). The group told companies to streamline their pay incentives to achieve long-term stability and told regulators to assess a company’s pay policies when determining its safety and soundness. The practices should promote principles of the Financial Stability Forum--which recommended that boards independently create pay policies and monitor their effectiveness. Bonuses should directly relate to company performance and should shrink if a company does poorly ... * WASHINGTON (4/7/09)--The Federal Deposit Insurance Corp. (FDIC) has released its fourth quarter profiles of state-by-state banking and economic conditions. The profiles are broken down by state and include Puerto Rico and the U.S. Virgin Islands ... * WASHINGTON (4/7/09)--The Credit Union National Association will offer a vendor due diligence audio conference April 14 from 1 p.m. to 2:30 p.m. CDT. The conference will provide information on recent National Credit Union Administration guidance on the evaluation of third-party relationships; effective planning for third-party arrangements; credit union-wide vendor risk assessments; basic contracting tips; and information on how to create solid staff oversight and quality control ...

Federation advocates CDRLF as secondary capital

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ALEXANDRIA, Va. (4/7/09)--The National Federation of Community Development Credit Unions sent a letter Thursday to the National Credit Union Administration (NCUA) to “urge swift action to assist low-income credit unions at a time of unprecedented challenge to their survival.” The federation requests that NCUA amend the regulations of the Community Development Revolving Loan Fund (CDRLF) to permit the issue of secondary capital loans to low-income designated credit unions, which will enable them to:
* Maintain and expand their services in distressed communities; * Increase their regulatory net worth; * Avoid prompt corrective action (PCA); * Minimize the need for mergers and liquidations; and * Provide an added layer of financial insulation for the National Credit Union Share Insurance Fund.
The CDRLF, established by Congress in 1979, makes non member deposits and loans at a rate of 1% for five-year terms. Shifting the CDRLF from providing liquidity deposits and loans to provide secondary capital loans “will provide a source of vitally needed net worth to low-income credit unions, helping to ensure that they can maintain or expand their role in revitalizing their communities,” the federation said. The federation estimated that NCUA’s corporate stabilization plan will cost community development credit unions $55.7 million. About 87.6% of CDCUs will not be profitable this year, and 20% will have a net worth less than 6%. The Credit Union National Association wishes to work with the federation to pursue its request of secondary capital for low-income credit unions from NCUA.

Comment call on CU reporting system

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WASHINGTON (4/7/09)--The Credit Union National Association (CUNA) is seeking comments from credit unions regarding the National Credit Union Administration’s (NCUA) proposed rule to require federal credit unions to submit reports and other information through a new, web-based system expected to be in place this year. Currently, federal credit unions can submit their reports by sending them electronically using NCUA software, e-mailing them, saving them to a CD and then sending to NCUA, or sending them as hard copies. The new process aims to make reporting more efficient and provide a single portal for credit unions to submit, edit and view the data NCUA collects. It is expected to be implemented during the third quarter for natural person credit unions, and next year for corporate credit unions. Comments are due to CUNA May 15. For more information, use the link.

Mills confirmed as SBA administrator

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WASHINGTON (4/6/09)--The U.S. Senate Friday confirmed the nomination of Karen Gordon Mills as 23rd administrator of the Small Business Administration (SBA). As administrator, Mills will lead in helping small business owners and entrepreneurs secure financing, technical assistance and training, and federal contracts. In a congratulatory letter to Mills, Credit Union National Association (CUNA) President Dan Mica noted the importance of member business lending for a number of credit unions and said working with SBA to facilitate those efforts is a priority for CUNA. "I would welcome the opportunity to meet with you and discuss how I believe credit unions could work even closer with the SBA to increase member business lending and help drive the economic recovery," he added. In testimony Wednesday before the Senate Committee on Small Business and Entrepreneurship, Mills discussed her hands-on experience managing and helping small businesses grow. “I was there on the factory floor in Arkansas and Ohio working to weather the recession of the early ‘90s,” she said. “Those experiences give me a deep understanding of what our small businesses need today to survive this downturn and to prosper in the years ahead.” Mills, of Brunswick, Maine, was president of MMP Group and has a 25-year career of investing in small businesses. In 2007, she was appointed by Maine Gov. John Baldacci as chair of the state’s Council on Competitiveness and the Economy, where she focused on attracting investment in rural and regional development initiatives. Mills is also a member of the Council on Foreign Relations. She holds a degree in economics from Harvard University and an MBA from Harvard.

NCUA releases corporates distressed securities info

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ALEXANDRIA, Va. (4/6/09)— The National Credit Union Administration (NCUA) said Friday it plans to release information about the distressed securities held by U.S. Central FCU and Western Corporate FCU (WesCorp), including information on the Committee on Uniform Security Identification Procedures (CUSIP) numbers and par value. The announcement drew a positive response from the Credit Union National Association (CUNA), which has been pressing NCUA for greater transparency on its actions surrounding the corporates. Chief among its requests, CUNA specifically asked for the information on distressed assets and CUSIP numbers, especially after U.S. Central and WesCorp were placed into conservatorship last month. CUNA President/CEO Dan Mica commended the NCUA Board for moving to make this information available. “We’re pleased that the NCUA board is responding positively to our strong call for greater transparency," Mica said. "The release of information will shed new light on the assumptions, analysis and findings reflected in a PIMCO, which served as the basis for the agency’s estimate of the cost impact on credit unions.” The NCUA engaged Pacific Investment Management Company LLC—or PIMCO—for an independent analysis of potential losses at the two corporates. On Friday the agency said it will be releasing to members of U.S. Central and WesCorp information on the distressed securities each institution holds, including the CUSIP number and par value for each of the securities. The NCUA’s release of the securities information, Mica said, will, in effect, give the credit union movement the information it needs to do its own analysis comparable to PIMCO’s. The NCUA also said it plans soon to make public a summary of the analysis of the securities and various third-party estimates of credit losses. And it is directing U.S. Central and WesCorp to have their external vendors conduct quarterly reviews of all private-label mortgage-backed securities to determine revised estimates on credit losses that can be compared against NCUA’s own analysis. "This information will be very useful in determining the extent to which credit union capital deposits in corporate credit unions might be impaired," Mica noted. However, he added that CUNA will continue to vigorously pursue further clarity on how NCUA will view the accounting of the costs to natural person credit unions of the agency’s actions to stabilize the corporate system. “CUNA will also continue to work with NCUA toward passage of its legislative plan to mitigate those costs to credit unions by raising NCUA's borrowing authority from Treasury and allowing credit unions to spread out the costs over at least five but preferably seven or eight years,” Mica said. Use the resource link below to read the NCUA’s release on its second weekly update on corporates.

Cherry Blossom Run kicks off with CUNA help

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Click for slide showCUNA's Dan Mica holds up a flyer promoting a Baghdad, Iraq, "Cherry Blossom Run" being held in the Iraqi capital the same day at the Credit Union Cherry Blossom 10-Mile Run. The flyer was sent to Mica by a U.S. Navy officer attached to the U.S. Army and serving in the Iraqi capital. Mica, while still a Member of Congress, appointed the officer to the U.S. Naval Academy in 1985. The Baghdad run is being called the "Combat Zone Counterpart" to the Washington, D.C. race. Mica noted the Baghdad event during a check presentation press conference Friday at Children's Hospital in Washington, D.C., honoring the amount of funds raised by this year's Cherry Blossom Race.
WASHINGTON (4/6/09)--Distributing T-shirts Senate offices and praising the work of the credit union organizers of the Credit Union Cherry Blossom 10-Mile Run were two ways on Friday that CUNA helped kick off the race, which coursed through the streets of Washington on Sunday. A team of CUNA staff members picked up T-shirts at U.S. Senate FCU and distributed one to each Senate office. The T-shirts promoted the “Capitol Hill Competition” of the Cherry Blossom Race--a “race within a race” for members and staff of the Congress. CUNA sponsors the competition with U.S. Senate FCU, Wright Patman Congressional FCU and the National Association of Federal Credit Unions. Meanwhile, also on Friday, CUNA President/CEO Dan Mica, along with CUNA Chairman Kris Mecham, attended the annual “kickoff press conference” for the Cherry Blossom Run at Children’s Hospital of Washington, D.C. Proceeds from funds raised by credit union organizers benefit Children’s Miracle Network, which in turn benefits Childrens’ Hospitals across the nation. In his remarks, Mica noted the vital role that the Cherry Blossom Race plays in supporting Childrens’ Hospitals, and praised the work of Credit Union Miracle Day, the credit union group that organizes fundraising. Mica also noted that the Cherry Blossom Race is receiving attention well beyond Washington. Holding up a promotional flyer, Mica told the group a “concurrent Cherry Blossom Run” was held on Sunday in Baghdad, Iraq. The flyer was sent to Mica by a U.S. Navy officer attached to the U.S. Army and serving in the Iraqi capital. Mica, while still a member of Congress, appointed the officer to the U.S. Naval Academy in 1985. The Baghdad run is being called the “Combat Zone Counterpart” to the Washington, D.C. race. The Cherry Blossom Run annually draws up to 13,000 runners; about 75% of the 1,500 volunteers who help run the race are credit union staff or volunteers. CUNA also sends a team of volunteers to help at the race.

CUs help Cherry Blossom runners Year seven and counting

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Click to view larger image Credit union volunteers blanketed Washington, D.C.'s National Mall to help approximately 13,000 runners participate in the CU Cherry Blossom 10-Mile Run, including dozens of helpers from CUNA. CUNA's Kathy Thompson (foreground) and Peg Spangler, along with AACUL's Pat Sowick, were part of the CUNA crew hustling to check in gear stowed by the corps of runners participating in the Sunday, April 5 race that raised funds for Children's Hospitals. (CUNA Photo)
WASHINGTON (4/6/09)—For seven consecutive years, credit union volunteers, hoping to drive home the credit union message "people helping people," hit the National Mall by 6 a.m. Sunday to stow the gear of runners in the Credit Union Cherry Blossom 10-Mile Run. A long patch of rainy, gray weather cleared for the 13,000 runners at the event, which included hundreds of participants representing Capitol Hill. Pat Keefe, Credit Union National Association (CUNA) vice president of communications and media outreach, who coordinates the volunteer effort for CUNA, said Sunday, "The most important thing I think we get out of this annual exercise is showing the people running the race the credit union difference in action." "CUNA folks, for instance, volunteer to help stow runners' valuables, keeping them safe and organized during the race," said Keefe. "We’ve done this in the rain, in flurries--even on an occasional nice morning like this one. Our intent is to help runners--many of whom are from Capitol Hill--make a connection between credit unions and 'people helping people.'" Among Keefe's crew of volunteers were CUNA staff and their family members, and helpers from the National Credit Union Foundation, the American Association of Credit Union Leagues, and the Association of Corporate Credit Unions. Credit Union Miracle Day, Inc. (CUMD), sponsor of the 37th annual Credit Union Cherry Blossom 10-Mile Run, raised $1 million to benefit Children's Miracle Network and its 170 affiliated children's hospitals nationwide. With this year's donation, CUMC will have contributed a total of $4.6 million to children's hospitals since its inception in 2001.

Inside Washington (04/03/2009)

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* WASHINGTON (4/6/09)--The Small Business Administration (SBA) said that the guarantees and fee changes the agency made to increase interest in lending has worked. Since provisions contained in the economic stimulus package increased the percentage of guaranteed small business loans to 90%, the agency has approved 4,256 loans worth $800 million total (American Banker April 3). Average weekly loan volume also has increased 21.7% to $146 million ... * WASHINGTON (4/6/09)--The financial industry is stressed out over financial institution stress tests, according to financial observers. The tests were announced two months ago and have caused increased anxiety in the industry because regulators have not said what results they will reveal (American Banker April 3). Some observers say the results need to be made public, or else more confusion will occur. Unless the results are made public, there will be more speculation, said Robert Clarke, a former comptroller of the currency. Some banks who pass the tests may try to publicize it--a move that might be in the best interest of some institutions, while others who remain quiet may tip off the industry that they did not do well, added Chris Low, chief economist, FTN Financial ... * WASHINGTON (4/6/09)-- National Credit Union Administration Board Member Gigi Hyland visited Treasury Department FCU in Washington, D.C., Wednesday, to meet with staff and CEO Alfred Scipio, and Operation HOPE CEO/founder, John Hope Bryant. Operation HOPE is a non-profit, public benefit organization with the mission of expanding economic opportunity in underserved communities through economic education and empowerment. The HOPE partnership with Treasury Department FCU, called HOPE Inside, is the first of its kind in the eastern U.S. and the first in a credit union. Through the partnership, Treasury Department FCU provides financial literacy and economic empowerment financial services to its members, including seminars on home buyer education and credit and money management education. In its first year, the credit union assisted over 2,740 members. From left are Hyland and Bryant. (Photo provided by the National Credit Union Administration) ...

FASB acts on mark-to-market OTTI

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WASHINGTON (4/3/09)—The Financial Accounting Standards Board (FASB) Thursday adopted rule changes on mark-to-market accounting and on treatment of the "other-than-temporary impairment" (OTTI) of assets. The Credit Union National Association (CUNA) said FASB’s action is generally a positive development on the OTTI changes and will help credit unions and other financial institutions deal with some of the current market issues. However, CUNA added, FASB could have done more. For instance, as FASB indicated in its March 17 proposal, the OTTI changes are not retroactive for 2008 financial statements. The accounting changes do ease somewhat the rules for financial institutions regarding securities that must be treated as OTTI and in that sense are a step forward, according to CUNA. However, the trade group said it was unfortunate the changes will likely have minimal impact on asset-backed securities held by U.S. Central FCU and Western Corporate FCU, the two corporate credit unions recently put into conservatorship by the National Credit Union Administration (NCUA). Because of that, the change may have little bearing on the cost to credit unions of NCUA’s corporate stabilization plans, CUNA noted. Final language hasn’t been released yet, but CUNA said key points based on today’s action include:
* As noted, the changes are not retroactive for 2008 financial statements. CUNA and others urged that changes apply beginning with year-end 2008. The decision may have been FASB’s attempt to find a middle ground between those promoting changes that reflect today’s economic reality and those calling on FASB to resist and preserve the status quo. * Prior to Thursday’s action, financial institutions with securities determined to be OTTI had to record the entire impairment in their earnings, whether it was based on credit, liquidity or other factors. FASB did not change the requirement to record the amount of impairment in earnings based on credit losses. * Impairment losses on debt instruments resulting from other factors, such as liquidity, would be reported as other comprehensive income (OCI) and won’t have to be reflected in earnings. This will be useful for reporting assets where the market is not functioning normally but that still are performing and have positive cash flows. * Whether separation of credit from other losses is permitted depends on the likelihood that the security will be held until it recovers in value; * On fair value, FASB adopted guidance for determining whether or not a market is active and whether or not a transaction is distressed—two key factors in applying fair value standards. However, CUNA believes there is still room for substantial improvement here and will continue to press this point with FASB.
Under FASB’s action, compliance is mandatory after June 15, 2009. Early adoption is allowed for periods ending after March 15, 2009. Final changes should be out the second week of April.

Inside Washington (04/02/2009)

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* WASHINGTON (4/3/09)--Karen Mills, President Barack Obama’s nominee to lead the Small Business Administration (SBA), said during her confirmation hearing, that she will reach out to non-SBA lenders to revive lending. New technology could be used to connect borrowers and lenders more efficiently, she added. The hearing was before the Senate Small Business Committee Wednesday (American Banker April 2) ... * WASHINGTON (4/3/09)--National Credit Union Administration Vice Chairman Rodney E. Hood yesterday addressed the American Credit Union Mortgage Association (ACUMA) Spring Conference in San Francisco. During the event, Hood stressed that credit unions should seize this opportunity to engage in responsible mortgage lending. He emphasized the importance of pre- and post-purchase counseling as well as rent-to-own strategies that provide the financial education necessary to eventually sustain homeownership. From left are Hood and John Reed, chairman of ACUMA board of directors and president/CEO of Maine Savings FCU, Hampden, Maine. (Photo provided by the National Credit Union Administration) ...

Committee approves cardholders bill of rights

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WASHINGTON (4/3/09)--The House Financial Services subcommittee on Financial Institutions approved by voice vote Thursday H.R. 627, the Credit Cardholders’ Bill of Rights Act. Several amendments were included in the bill that could benefit credit unions. One would extend the effective date of the legislation to 12 months after the enactment or July 1, 2010--whichever comes first. “This was a key point that CUNA made in its testimony and represents a significant victory,” said Ryan Donovan, CUNA vice president of legislative affairs. CUNA testified on the legislation March 19 and encouraged the committee to extend the date to July 1, 2010. The subcommittee also approved a manager’s amendment that includes a change regarding statement dates. H.R. 627, as introduced, would prohibit creditors from considering a payment as late unless the consumer is provided with reasonable time to make payments. The bill would require statements to be mailed at least 25 days before the due date. CUNA encouraged the committee to consider a 21-day threshold because the 25-day requirement would be too close to the end of the billing cycle and could create logistical problems for credit unions. The manager's amendment includes the 21-day threshold that CUNA sought. The subcommittee also approved another amendment that would prohibit issuers from charging fees to consumers paying credit card bills online or by phone. Two amendments--offered by Rep. Jeb Hensarling (R-Texas), which deal with universal default and interest rates--were defeated. The first amendment would have allowed card companies to use universal default or double cycle billing if the company has at least one card that does not use double cycle billing or universal default. The second amendment would have permitted issuers to raise rates on a consumer who failed to pay three times in a year. The full committee or the House of Representatives could consider the bill when Congress returns from the spring district work period, Donovan said.

CUNA issues comment call for TISA rules

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WASHINGTON (4/3/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the National Credit Union Administration’s (NCUA) proposal to amend Regulation DD, the Truth in Savings Act (TISA), to incorporate two recent final rules issued by the Federal Reserve Board. Comments are due to CUNA by May 15. NCUA’s proposal would require credit unions to disclose on periodic statements dollar amounts charged for overdraft fees and returned item fees--for the month and year-to-date. Currently only credit unions that promote or advertise the payment overdrafts are required to disclose this information. The effective date for the overdraft rule is Jan. 1, 2010. The electronic disclosures rule aims to make standards fore electronic delivery of TISA disclosures consistent. It deals with a rule the Fed issued in October 2007 about uniform disclosure standards. The effective date will be 30 days after the final version of the rule is issued. TISA requires that the NCUA adopt regulations similar to those of the Fed, taking into account the unique nature of credit unions and the limitations under which they may pay dividends on member accounts. For more information, use the link.

Bair Large banks need to increase capital

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WASHINGTON (4/2/09)--Large banks deemed “high risk” should raise their capital to protect the overall financial system, said Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair in a speech Wednesday that was widely reported by national media. The capital requirements should be a part of regulatory oversight of risky institutions. Regulators must end the notion that large banks are “too big to fail,” Bair said (Associated Press April 1). Last week, the Obama administration released details of a plan that would overhaul financial regulation. The plan would establish a single agency to oversee systemically important firms and critical payment and settlement systems. It also would establish higher standards on capital and risk management for systemically important firms (News Now March 27). Earlier this year, Bair said that U.S. banks were well-capitalized. However, she acknowledged that prolonged shocks to the banking system would require institutions to increase their capital reserves (News Now Feb. 25).

Committee to vote today on credit card bill

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WASHINGTON (4/2/09)--The House Financial Services subcommittee on Financial Institutions is scheduled to vote today on H.R. 627, the Credit Cardholders’ Bill of Rights Act, which amends the Truth-in-Lending Act. The bill would establish fair and transparent practices related to the extension of credit under an open-end consumer credit plan. On Tuesday, the Credit Union National Association (CUNA) sent a letter to Rep. Luis Gutierrez (D-Ill.), chairman of the subcommittee. In the letter, CUNA noted that H.R. 627 would require creditors to provide cardholders, in each periodic statement, a telephone number, Internet address and website address at which the cardholder may request the payoff balance on the account. Most credit unions already provide a telephone number but should not be required to also provide an Internet address and website since not all credit unions have interactive Internet capabilities, CUNA said. CUNA supports an amendment to the bill that would extend the legislation’s effective date from three months to one year after enactment or June 1, 2010--whichever comes first. “With this change, credit unions can continue to prepare to comply with the new regulations--without the additional cost associated with expediting compliance--while providing their members with the financial tools and services on which they rely,” wrote CUNA President/CEO Dan Mica. On Tuesday, the Senate Banking Committee voted Tuesday in favor of S. 414 that would amend the Consumer Credit Protection Act to ban abusive credit practices, enhance consumer disclosures and protect underage consumers.

Inside Washington (04/01/2009)

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* WASHINGTON (4/2/09)--Federal Reserve Board leaders and former leaders expressed their concerns about creating a systemic regulator (American Banker April 1). According to Alan Greenspan, former Fed chairman, regulators can’t identify systemic risk very well in advance. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in a speech Tuesday that new regulatory restrictions would trigger large supervisory costs and stifle innovation. Creating a new regulator also would add a “new layer on top of an already complicated system,” said Vincent Reinhart, Fed former director of monetary affairs. The Obama administration announced last week a plan for financial regulatory overhaul that would include creating a regulator to oversee systemically significant institutions (News Now March 27) ... * WASHINGTON (4/2/09)--The Treasury Department needs to establish a better system to collect dividend payments under the Troubled Asset Relief Program (TARP), the Government Accountability Office (GAO) said in a report released Tuesday. TARP had received about $2.9 billion in dividends through March 20. But dividends were not declared or paid to Treasury for $733 million of cumulative dividends from American International Group (AIG) under the Systemically Significant Failing Institution Pogram and $150,000 of noncumulative dividends from eight institutions under the Capital Purchase Program (CPP), according to the report. As of March 27, Treasury has disbursed $303.4 billion of the $700 billion in TARP funds, most of which went to purchase preferred shares of 532 financial institutions under the CPP. Treasury “has continued to improve the integrity, accountability and transparency of TARP,” GAO said. However, it provided six recommendations for executive action in its report to improve the program ... * WASHINGTON (4/2/09)--The Treasury Tuesday announced that it will extend its temporary money market funds guarantee program through Sept. 19 to support stability in the financial markets. The program was scheduled to end April 30. The Treasury also released an extension notice to provide the procedures for participating funds to ensure participation in the program and instructions for making extension participation payments. An extension payment, notice and updated AnnexA are due by April 13. A Bring-Down notice is due May 11 ...

NCUA reiterates Flexible stance on impairment accounting

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WASHINGTON (4/2/09)—The National Credit Union Administration (NCUA) intends to issue an accounting bulletin stating the agency will be flexible about when a credit union books the cost of the premium being assessed to replenish the National Credit Union Share Insurance Fund (NCUSIF). In a communication provided to the Credit Union National Association (CUNA) yesterday the NCUA said it will not object if a credit unions works with its accountant and delays booking the impairment of the 1% NCUSIF deposit. The insurance costs, which include replenishing the 1% NCUSIF deposit and an insurance premium to restore the NCUSIF to 1.3%, pay for the costs to the NCUSIF associated with NCUA’s actions involving corporate credit unions. These actions include placing U.S. Central FCU and Western Corporate FCU into conservatorship March 20, providing deposit guarantees for corporate credit unions and $1 billion in capital to U.S. Central. The bulletin language will state, "The regulatory reporting guidance in Accounting Bulletin 09-2 reflects the actions the NCUA has taken which appropriately should be reported by the March 31, 2009 quarter-end. “The various proposed legislative alternatives, if granted by Congress and acted upon by the board, could help the credit union industry spread the impact of assessments to reposition the NCUSIF to cover future losses." The agency announced last week that it has drafted legislation that will allow credit unions to spread out the deposit replenishment costs. There is also pending legislation to allow NCUA to spread out insurance costs for up to five years. CUNA supports such legislative action and continues to urge that insurance costs be spread out over seven or eight years. CUNA also supports legislation to increase the agency's borrowing authority to help finance the insurance costs. The bulletin, expected this week, will provide official notice of what a senior NCUA staff member told CUNA last week (News Now March 30). Stressing the need for congressional action for the bill to become law—and the uncertainty that surrounds that process—the NCUA bulletin will state that if a credit union’s licensed practitioner is willing to provide a written opinion that allows for the delay in the recording of the expenses and indicates in their opinion it is in compliance with GAAP, NCUA examiners will not take exception absent a definitive ruling from the accounting profession to the contrary.

CUNA backs FASB OTTI fair value plans

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WASHINGTON (4/2/09)—The Credit Union National Association (CUNA) backed two recent Financial Accounting Standards Board (FASB) proposed staff positions (FSPs) that are intended to provide additional application guidance regarding fair value measurements and impairments of securities. In summary, FASB released the following for comment on March 18:
* Proposed FSP FAS 157-e, called Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, would provide guidelines on how to best apply FASB Statement No. 157, Fair Value Measurements, in a market that is not active. * Proposed FSP FAS 115-a, FAS 124-a, and EITF 99-20-b, Recognition and Presentation of Other-Than-Temporary Impairments(OTTI), is intended to provide greater clarity and consistency in accounting for and presenting impairment losses on securities.
In an April 1 comment letter to FASB, CUNA wrote generally supports the proposed FSP on OTTI and encouraged the board to make the guidance applicable both to debt and equity securities. CUNA wrote that FASB’s companion proposed FSP on fair value likely would minimize the need for the OTTI proposal. However, the group encouraged FASB to also adopt the OTTI plan “as long as it is entirely consistent with the proposal on fair value and other existing guidance.” CUNA also asked FASB to make the guidance retroactive to Dec. 31, 2008. FASB has proposed both sets of guidance would be effective for interim and annual periods ending after March 15. FASB has scheduled an April 2 meeting to evaluate all comment letters and other input received on the FSPs. Use the resource link below to read CUNA’s comment in its entirety.

Payday Loan Reform Act hearing today

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WASHINGTON (4/2/09)--The House Financial Services subcommittee on Financial Institutions is scheduled to hold a hearing today on the Payday Loan Reform Act--H.R. 1214--which would address two major payday loan concerns. H.R. 1214 focuses on the fees charged by lenders for payday loans and the cycle of debt that consumers incur when they cannot immediately repay their loans. If approved, the bill would create a federal floor on which state consumer protections can be added and give borrowers a three-month repayment plan with no additional fees or interest. The bill also would prohibit lenders from making more than one payday loan at a time to a consumer, or to accept a payment plan payment from another payday loan. “The status quo in the payday lending industry is unacceptable,” said Rep. Luis Gutierrez (D-Ill.), subcommittee chairman. “And I will fight to provide a federal safety net for the working poor who are suffering the most in this economic downturn.” H.R. 1214 would “improve the payday lending laws in 23 states and provide additional consumer protections for millions of hardworking Americans who do not have access to the mainstream financial system,” Gutierrez added.