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U.S. Mortgage Corp. servicing manager pleads guilty

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NEWARK, N.J. (5/17/10)--The former servicing manager of U.S. Mortgage Corp. pleaded guilty Thursday in a U.S. District Court in Newark, N.J., to conspiracy to commit wire fraud. Credit unions lost $136 million when the company and its subsidiary, CU National Mortgage LLC, fraudulently sold hundreds of their mortgage loans to Fannie Mae, then went bankrupt. Leroy Hayden, 47, of East Stroudsburg, Pa., was the servicing manager of Pine Brook, N.J.-based U.S. Mortgage from 2004 through Jan. 28, 2009. He admitted conspiring with company president Michael J. McGrath Jr. and several others to fraudulently sell the loans belonging to the credit unions, said the Department of Justice in a press release (PR Newswire May 13). Hayden provided to credit unions reports that falsely stated the loans that had been sold were still in the credit unions' portfolios, and, at McGrath's direction, concealed the sales. He also admitted he modified data in U.S. Mortgage's servicing system to help carry out the scheme, said the Department of Justice. The scheme used the proceeds from the sales to Fannie Mae to fund U.S. Mortgage's operations, McGrath's personal investments and investments he made on the company's behalf, said prosecutors. Hayden faces up to five years in prison, a maximum fine of $250,000, and possible restitution to the victims. His sentencing is scheduled for July 27. McGrath pleaded guilty in June 2009 to conspiracy to commit mail and wire fraud, and conspiracy to commit money laundering. He is scheduled to be sentenced on July 6.

N.C. governor appoints two to fin lit council

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GREENSBORO, N.C. (5/17/10)--North Carolina Gov. Beverly Perdue has appointed Winston-Salem (N.C.) City Employees’ FCU President/CEO Tony Ebron and State Employees’ CU Senior Vice President of Education Services Leigh Brady to the North Carolina Financial Literacy Council. Their appointments began in March and run for a three-year period, according to the North Carolina Credit Union League (Weekly Update May 10). The state General Assembly created the council last year to address the need for financial education in public schools and communities. The council will document existing programs and policies related to financial education in the state, establish student financial literacy goals and benchmarks, monitor implementation of financial education statewide and connect students an adults to financial institutions and curricula. SECU is based in Raleigh, N.C.

Tennessee CUs step up to help flood victims

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NASHVILLE (5/17/10)--Credit unions in Nashville are responding to the needs of their members affected by recent flooding in the area. Vanderbilt University Employees’ CU, is doing “what we need to do to get people’s lives back to the baseline,” said board president William Rochford. Nashville experienced significant rainfall the weekend of May 1-2, which caused severe flooding in the metro area and many areas along the Cumberland and Harpeth rivers. Many residents lost their homes, cars, and even their lives. While the sun is starting to dry up the water, Nashville is working to rebuild. Vanderbilt University Employees’ CEO Michael Bittle said the $20-million asset credit union jumped to help its members immediately after the flood. “We didn’t wait for the first person to ask us for help,” he said. On May 3, after the flooding, Bittle drove into work from his home, which is located in an area that wasn’t hit as hard by the flooding. “I didn’t realize how bad it was,” he said. When he got to work, Bittle called Rochford immediately and said the credit union needed to help flood victims. “If there ever was a place for credit unions to step up and use the philosophy of people helping people, this was it,” he said. Within a matter of days, the credit union assembled a plan to help, including:
* A “People Helping People” flood relief fund of up to $1,000--with 0% interest--to be repaid by payroll deduction of $100 over 10 months; * A one-month deferral of all payments on credit union loans; and * An appliance loan of up to $5,000 for 24 months at 9.9% interest to replace lost appliances.
The credit union also made $250,000 available to members for losses and is working with members who lost their cars in the flood. Also, the credit union will offer services such as a home owner equity line of credit, a personal line of credit and a signature advance personal loan. The credit union itself did not have any damage except for a little water under the windows in Bittle’s office. However, the credit union’s building had some water in the basement. “If [the water] had got into the electrical system, we would have had to move,” Rochford said. “It’s caused us to revisit our emergency response plan.” Some members lost everything. Others had water in the basement or living areas, and had to rip out carpets and replace drywall. Smaller credit unions like Vanderbilt that took action are “a shining example of getting it right,” Rochford said. “This is an example of what [credit unions have] always been about.” “What’s right about America right now--credit unions,” he added. Nashville as a city also has demonstrated the credit union movement philosophy as well as anyone could have. “We’re doing what we’re supposed to be doing,” Rochford said. “[Nashville] is a giving community and a caring community.” Another small Nashville credit union, the $29-million-asset Employees CU, will offer an unsecured loan of $2,500 with liberal underwriting. It also will offer 100% financing to members who have mortgages. “We’re going to offer whatever it takes to get the house habitable,” said Phillip Elam, Employees CU's CEO. Members can make penalty-free share certificate withdrawals and Employees CU will replace checks, cards and other items that may have been destroyed in the flood. It also will liberally look at fees charged to members and will grant two- to three-month-extensions on all loans. Elam said he learned that 90% of people whose homes were affected had no flood insurance. Most people had basement flooding, and many lost everything inside of their homes. Some houses had three to six feet of water and the drywall needed to be stripped out. Employees were impacted, also, he said. Two employees had flooded basements, and some employees struggled to get to work after the flood. “Getting to work was an issue on Monday after the flooding,” Elam said, noting that many of the roads were flooded or washed out. The credit union didn’t experience any damage itself. While members are coping with damage to their homes, the credit union expects to also deal with members who lost their cars. Because so many cars were swept away, rentals are at a premium, Elam said. “There are no cars to be had here,” he said.

Fitch affirms ratings of eight corporates

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MADISON, Wis. (5/17/10)--Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings (IDRs) at “A+” (high credit quality) and 'F1+' (highest short-term credit quality), respectively, of eight major corporate credit unions. The Rating Outlook is Stable. The affirmation of the IDRs is based on the National Credit Union Administration's (NCUA) continued support for these companies, Fitch said in a press release. Recently, NCUA extended a waiver that permits corporate credit unions to operate below minimum regulatory capital requirements. Also, NCUA is in the process of developing a plan to remove roughly $50 billion of problem securities from the corporate credit union system, Fitch said (Business Wire May 13). The IDRs reflect the companies' '1' support and 'A+' support floor ratings, which acknowledge NCUA’s support and emphasize the importance of government support in assessing probability of default. “Given this continued support, Fitch said it believes that the existing support ratings, support floors, and IDRs remain appropriate at this time. As such, the Outlook is Stable,” it said. Also, Fitch said the corporates will continue to benefit from the planned restructuring of the corporate credit union network and the implementation of new regulations. However, Fitch said a restructuring of the network could potentially lessen the level support provided to these companies in the future. The Individual ratings of the corporate credit unions rated are at “E”, reflecting that these companies still have serious capital challenges and largely operate below regulatory capital minimums, Fitch said. With the exception of Eastern Corporate FCU (EasCorp) and Mid-Atlantic Corporate FCU (Mid-Atlantic), the corporate credit unions operate with total capital ratios below mandatory regulatory requirements necessitating regulatory forbearance from the NCUA. Constitution Corporate FCU is operating under special regulatory assistance related to its depleted capital position. Fitch said some institutions have a heightened risk of regulatory intervention due to the corporate credit unions’ weak capital position and the prospect of future losses in their investment book. Should any institution require regulatory intervention, Fitch said it would expect the level of governmental support for the company to remain unchanged. For a complete list of ratings actions for each of the eight corporates, use the link.

INewsdayI In turbulent times more turn to CUs

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MADISON, Wis. (5/17/10)--More U.S. consumers are turning to credit unions amid a troubled economy that’s creating mounting frustration with banks, Newsday.com said Thursday. Credit union lending was up for several types of loans, while bank lending was down at the end of 2009, the Credit Union National Association (CUNA) told Newsday. “And for the first time in recent years, credit union deposits grew at a faster pace than bank deposits,” the publication said. “The difference was stark, too: Credit union deposits were up 10.3% last year, but bank deposits rose only 2.1%.” “We’ve seen a huge influx in savings in the last 18 months,” Pat Keefe, CUNA vice president of communications and media outreach, told Newsday. Where is the money coming from? “It’s coming from banks,” Robert Allen, president/CEO of Farmingville, N.Y.-based Teachers FCU, one of the largest U.S. credit unions, told Newsday. Troubled banks need to re-establish their financial stability by cutting their lending and downsizing their deposits. So when customers turned away by those institutions search for a new place to conduct financial business, credit unions become more attractive, Allen added. Meanwhile, Municipal CU in Manhattan has experienced balance transfers on the credit union’s Visa cards. They’ve tripled to $600,000 in March from $200,000 in January, which indicates consumers are departing banks, Geraldine Light, a vice president at Municipal CU, told Newsday. Kam Wong, Municipal president/CEO, noted that those transfers are a reaction to how banks often raise interest rates when consumers have late payments or exceed their credit limit. Credit unions generally don’t implement that type of “penalty pricing,” he told Newsday.

Rep. Heinrich Dont make CUs pay for banks misdeeds

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ALBUQUERQUE, N.M. (5/17/10)--Credit unions and small community banks should not bear the same regulatory burden as large national banks, U.S. Rep. Martin Heinrich (D-New Mexico) told the Credit Union Association of New Mexico (CUANM). Heinrich recommends an approach to financial regulation that would impose different restrictions on large national financial institutions than on credit unions and community banks. Furthermore, credit unions and small community banks should not suffer because of the misdeeds of large national financial institutions, he told CUANM in a recent interview. “We’ve got to take a smart approach to regulation that goes after what the problems are,” Heinrich told CUANM. “We shouldn’t blame or hold accountable credit unions and community banks for some of the problems Wall Street banks created. We need to come up with policies that treat small community institutions differently than national institutions. That is the smart and correct approach to regulation.” Heinrich is co-sponsoring H.R. 3380 in Congress to raise the amount of member business lending permitted for credit unions from the current federal cap. He recently wrote a letter to Speaker of the House Nancy Pelosi and House Majority Leader Steny Hoyer urging them to raise the cap on credit union business lending to 25% of total assets from 12.25%. “My wife and I have been credit union members for a long time,” Heinrich told CUANM. “Right out of college we joined New Mexico Educators [CU] and it has served us well. I find credit unions know their customers. You can walk in and talk to a real person. You don’t get that kind of generalized treatment you sometimes receive from big national banks. “I think credit unions do a good job of meeting the needs of their individual members and I think that makes a difference,” he added. To read the interview, use the link.

NYIB conference offers CUs youthful outlook

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COLUMBIA, S.C. (5/14/10)--The National Youth Involvement Board’s (NYIB) annual conference in St. Louis July 26-29 is being billed as “Your Gateway to the Next Generation.” The conference aims to offer insight and peer exchange to support participants in their outreach to future members and consumers. Speakers on the agenda include:
* Brent Dixon, Filene Research Institute adviser on young adults; * Matt Davis, Filene adviser on innovation; * Claudine Oriani, chief creative officer with As If Productions; * Ron Galloway, director of the documentary “Why Wal-Mart Works and Why That Makes Some People Crazy”; and * James Robert Lay, social and viral campaigner, and founder of PTP New Media.
Dixon also is hosting a pre-conference workshop, “Design Thinking: A Human-Centered Approach to Innovation.” Sessions include:
* Becoming Younger Members’ Financial Advocate; * Truly Connecting with the Youth Market; * Youthful Products for a Younger Membership; * Top 12 Technology Trends for 2010; * Top of the Class Techniques; * Rocking the Vote or Rocking the Boat? Gaining the Influence of Youth through Economic Democracy; * Leadership Skill that Get Results; * What a Trip! A Tour of Mad City (Money); * Advancing Relationships after High School; and * Approaching Decision Makers for Favorable Results.
For more information, use the link.

CU System briefs (05/14/2010)

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* WARNER ROBINS, Ga. (5/17/10)--Robins FCU is among the financial institutions in the Warner Robins, Ga., area being forced to reissue credit and debit cards because a local, unidentified merchant was breached. Robins FCU said in a press release reported by the Macon Telegraph (May 14) that about 2,000 of its debit and credit cards were affected. Its card processor notified the $1.3 billion asset credit union that a merchant, whose name was not released, experienced a payment processing breach that compromised the cards of members and other customers who had conducted business there. Robins immediately blocked the cards and notified the accountholders via e-mails and letters and will be issuing new cards with new numbers and expiration dates ... * LAKE FOREST, Calif. (5/17/10)--Twelve Southern California credit
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unions and the CO-OP Network donated one million bags to "Stamp Out Hunger," the National Association of Letter Carriers' (NALC) food drive. The contributions helped promote the food drive and increase donations, according to Eagle Community CU, a participant. This year, more than 268,000 pounds of food--the second largest collection on record--were collected in Orange County. Last year credit unions donated 650,000 bags and helped prompted the most successful drive, said Eagle Community CU CEO Bill Birnie. "We really appreciate the support of our local credit unions," said Paula Miller, NALC Region One Food Drive coordinator. "The bags they donate are the only advertising we get that can double or triple donations," she said. Eagle's employees--including Eagle Internal Auditor Nancy Powers, shown here--also volunteered at five local post offices to unload and sort incoming donations. They processed 20% of the donations in the county. Other participants included: Priority One, CUT, Camino FCU, Southern California Postal CU, USC CU, CalCom FCU, LA Healthcare FCU, South Bay CU, Mattel FCU, City of Downey FCU, San Gabriel Valley Postal CU, and California Agribusiness CU. (Photo provided by Eagle Community CU) ... * HUNTSVILLE, Utah (5/17/10)--Employees of Weber State FCU, Ogden, Utah, participating in a twice-a-year highway cleanup program have contests over who can find the most unusual item beyond the typical cigarettes and beer cans. They've discovered bones, windshields and old toys. But on May 13, they found something that brought good news to Centerville resident David Davis: his wallet, which had been missing for nine months. In it were his driver's license, credit and debit cards, certification cards and more than $170 in cash. It took some legwork to find Davis, who was ecstatic. He told Weber State's marketing manager, Dustin Allen, that he had lost it in August after stopping at a gas station to gas up his watercraft. He set the wallet on top of the watercraft and forgot about it. It fell off to the side of the road. Davis had searched for it for hours. The credit union reunited Davis with the wallet on May 10 (Standard-Examiner May 13) ... * DES MOINES, Iowa (5/17/10)--A member of Tradesmen Community CU, Des Moines, Iowa, lost $392 in a cell phone phishing scam when someone in Dublin, Ireland, used an ATM to withdraw money from his credit union account in two thefts. George Lawrence told people someone sent a recording to his cell phone informing him his debit card had been deactivated. To reactivate it, he had to key in his account number and card expiration date on the phone. Lawrence said the request sounded reasonable because someone had used his debit card number to pay for six calls to sites he did not authorize in April. He notified the credit union of the fraudulent charges; the credit union told him he would not have to pay the amount stolen (The Des Moines Register May 12) ... * PHOENIX (5/17/10)--The former manager of the now-defunct Marian Miami FCU, which was based in Miami, Ariz., has been sentenced in a U.S. District Court in Phoenix to more than four years in federal prison for embezzling more than $860,000. Marlene Aquilera Pena, 46, also was ordered to pay restitution of nearly $1.2 million and to serve five years of supervised release after the prison term. She had pleaded guilty to three counts of embezzlement. Court documents said that she admitted taking funds for herself and her family by creating 141 fictitious loan accounts. The credit union was closed in 2006 after the embezzlements were discovered (The Arizona Republic May 14) ... * HARRISBURG, Pa. (5/17/10)--Walter Shanabrough, who served for 20 years as the board chairman of Blue Chip FCU in Harrisburg, Pa., died Tuesday, according to the Pennsylvania Credit Union Association (Life is a Highway May 14). He was 85. He served as chairman of the credit union from 1986 to 2006, stepping down to become chairman emeritus. A memorial service will be held May 28 at Chapel Hill United Church of Christ in Camp Hill, Pa. He is survived by his wife, two sons, a daughter, a brother and sister, and three grandchildren(Patriot-News May 14) ...