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CUNA urges action on series on CU relief bills

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WASHINGTON (5/5/14)--This morning, the Credit Union National Association is contacting each member of the House of Representatives, urging them to pass three credit union relief bills that are expected to come up for a vote in that chamber this week .

Those bills are the Capital Access for Small Community Financial Institutions Act (H.R. 3584), H.R. 2672, which would grant credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau, and The Community Institution Mortgage Relief Act (H.R.  3468) (News Now May 2).

Also this morning, CUNA is sending a series of letters to key lawmakers on Capitol Hill, thanking them for their leadership in developing other measures that will provide regulatory relief for credit unions--a top priority for CUNA--and for considering CUNA's views on behalf of credit unions while developing their bills.

"CUNA, the state credit union leagues, and credit unions have worked tirelessly to inform lawmakers of the crisis of creeping complexity credit unions face with respect to regulatory burden.  There are now a series of bills in the House that will, if passed, attack the problem from many directions," Ryan Donovan, CUNA senior vice president of legislative affairs, said Friday and added, "These are significant developments."

In its appreciation letters, CUNA stated its strong support for the following bill that are expected to be considered by the House Financial Services Committee this week:
  •  The Financial Regulatory Clarity Act (H.R. 4461), introduced by introduced by Reps. Shelley Moore Capito and Gregory Meeks, the chair and ranking member of the House Financial Services subcommittee on financial institutions and consumer credit. The bill would require financial regulators to determine whether new regulations are duplicative or inconsistent with existing federal regulations. Unnecessary regulatory burden could be avoided if regulators took these steps, so we strongly support this commonsense piece of legislation, CUNA wrote.
  • H.R. 2673, the Portfolio Lending and Mortgage Access Act introduced by Rep. Andy Barr (R-Ky.), which would treat mortgages held in portfolio at credit unions and other mortgage lenders as qualified mortgages for purposes of the Consumer Financial Protection Bureau mortgage lending rules. CUNA noted that it is appropriate to treat loans held on balance sheets as QMs because the lender retains all of the risk involved with the mortgages and is subject to significant safety and soundness supervision from its prudential  regulator. The statutory change, if made, will help credit unions, many of which are primarily portfolio lenders, continue to provide mortgage credit to their members, CUNA wrote.
  • H.R. 4521, introduced by Rep. Luetkemeyer (R-Mo.), would exempt credit unions under $10 billion in assets from a Dodd-Frank Act requirement that mortgage lenders must hold an escrow account for five years for higher priced, first-lien mortgages secured by borrower's principal dwelling. The requirement has forced some credit unions to shy away from higher priced mortgages because of the expertise that is required to establish and maintain the escrow accounts. CUNA noted that Dodd-Frank conveyed authority to the CFPB to exempt credit unions and other classes of entities from its rules to keep the regulatory burden on community financial institutions measured. However, the bureau has failed to exercise that authority to its fullest possibilities, making bills like Luetkemeyer's necessary, CUNA wrote.  H.R. 4521 also improves the exemption threshold for small servicers of mortgage loans from Section 6 of the Real Estate Settlement Procedures Act.

In its separate letter to all House members, CUNA urged passage of:
  • H.R. 3584 , the Capital Access for Small Community Financial Institutions Act, introduced by Reps. Steve Stivers (R-Ohio) and Joyce Beatty (D-Ohio), a bill to correct a drafting error in the Federal Home Loan Bank (FHLB) Act thereby allowing-state chartered, privately insured credit unions to join the FHLB system. The change would give 132 privately insured credit unions across the country additional opportunities to provide mortgage credit to their members, CUNA has noted.
  • The Community Institution Mortgage Relief Act (H.R.  3468). Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.) have introduced this bill to provide National Credit Union Share Insurance Fund (NCUSIF) coverage for trust accounts,  such as Interest on Lawyer Trust Accounts (IOLTAS) and other similar accounts. CUNA backs this bill as necessary because the National Credit Union Administration has interpreted that the Federal Credit Union Act does not permit it to extend such coverage.  H.R. 3468 would provide parity in the insurance treatment of trust accounts offered by credit unions with the treatment of similar accounts offered by banks.
  • H.R. 2672, which would grant credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau. The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas and CUNA maintains that any time credit unions can gain an additional opportunity to provide input into the process, they should do so.
When the letters are posted to the CUNA website, they will be available through the resource link below.

CUNA clarifies questions on post-death benefit payment collections

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WASHINGTON (5/5/14)--Receiving depository financial institutions (RDFIs) are liable for all benefit payments received after the death of a recipient, unless they meet certain requirements, the Credit Union National Association clarified in a CompBlog post.

According to U.S. Treasury regulations, an RDFI will not be liable if it:
  • Certifies that it did not have actual or constructive knowledge of the recipient's death or incapacity at the time of the deposit of any post-death benefit payments;
  • Returns all post-death benefit payments it receives after it learns of the death; and
  • Responds to the Notice of Reclamation completely and adequately, so that it is received by the Government Disbursing Office within 60 days from the date of the notice.
Credit unions should first determine the balance of a given account when it receives a notice of reclamation from the government. If there are insufficient funds, a partial payment should be remitted to the Government Disbursing Office that issued the reclamation, CUNA wrote.

The Treasury says financial institutions may not attempt to reclaim funds if all or part of post-death benefit payments have been withdrawn from an account. "If the RDFI does so, it acts under its own authority in terms of its contract with its depositor or under state law," according to the agency.

For the full CompBlog post, use the resource link.

Freddie Mac plans to purchase, secure multifamily loans

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WASHINGTON (5/5/14)--The multifamily housing unit of Freddie Mac plans to begin purchasing and securitizing Manufactured Housing Community (MHC) loans in a bid to increase available funding for affordable housing in rural areas, Freddie Mac reported last week.

Freddie Mac said stabilized, high-quality, professionally managed communities owned by experienced operators will be eligible for the program. Loans will be made to community owners. Community land, infrastructure, amenities and community-owned rentals will serve as collateral for securing MHC loans, Freddie Mac added.

"Manufactured housing communities are an affordable housing option for many low‐income individuals, especially in rural communities where affordable apartments are less prevalent," said David Brickman, executive vice president for Freddie Mac Multifamily Business. The financing, he added, will help to increase debt capital to rural areas and help provide housing options for underserved populations. "Nearly half of nation's manufactured homes are located in rural, non-metropolitan areas," Brickman said.

For more information, use the resource link.

Liquidation must stay a last CU resort: CUNA to NCUA

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WASHINGTON (5/5/14)--In its proposed updates to voluntary liquidation rules, the National Credit Union Administration should reinforce that liquidation of a credit union is a drastic step and should be only be undertaken when no other options are viable, the Credit Union National Association said in a comment letter filed with the agency last week.

The proposed liquidation rule updates, released at the February NCUA open board meeting, would permit liquidating federal credit unions to publish required creditor notices in electronic media or newspapers of general circulation.

It would also increase the asset size threshold for requiring multiple creditor notices, by exempting federal credit unions with less than $1 million in assets from the publication requirement, and exempting federal credit unions with less than $50 million in assets from the multiple publication requirement.

Other portions of the update impact how credit union members will be refunded their member shares in the event of a liquidation. NCUA Chairman Debbie Matz in February said the changes are intended to modernize the rule and factor in credit union growth since 1993, which was when the rule was last updated.

"We recognize that a small number of credit unions may choose to liquidate, but we urge NCUA to add language to the rule requiring agency staff to work with a credit union considering such an option to find ways to either continue operation or merge with another credit union, in order to ensure members will continue to have access to a credit union if at all possible," CUNA Deputy General Counsel Mary Dunn wrote.

While it generally supports the agency's efforts to update the rule and generally agrees with it, CUNA has recommended some changes.

"Consistent with longstanding CUNA policy, we believe that credit union liquidation should only occur as a last resort," Dunn added.

For more on the changes, use the resource link.

GAO report notes CFPB audit deficiencies

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WASHINGTON (5/5/14)--Internal control issues increase the risk that the Consumer Financial Protection Bureau may not detect and correct errors in its own financial statements, the U.S. Government Accountability Office reported last week.

The GAO analysis of the CFPB's fiscal 2012 and 2013 statements and other documents found that the bureau did not effectively design or implement:
  • Internal control over its year-end accrual process to ensure accounts payable amounts recorded were complete and accurate; and
  • Controls to ensure accurate and complete recording of its property and equipment transactions.
To address these issues, the GAO recommended that the bureau:
  • Strengthen the design and implementation of control procedures to require the review of tracking schedules, invoices, obligating documents and other underlying supporting documents;
  • Design and implement control procedures to ensure that property and equipment costs, including costs associated with internal-use software, are properly capitalized or expensed as appropriate;
  • Develop detailed guidance and provide training for contracting officer representative (CORs) to further assist them in identifying and estimating accruals, including examples of expenses that should and should not be accrued at the end of an accounting period and how to calculate amounts to be accrued; and
  • Strengthen the design and implementation of control procedures regarding the review of the accounts payable estimates to include variance analysis of calculations and comprehensive review of obligating documents, invoices, and the CORs' accrual calculations.
The GAO said the CFPB has agreed with these recommendations, and has implemented or is in the process of implementing the recommendations.

For the full GAO report, use the resource link.

NCUA releases Part II of RBC Q-and-A video

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ALEXANDRIA, Va. (5/5/14)--More credit union questions about the National Credit Union Administration's risk-based capital plan are answered by NCUA staff in a new, second YouTube video.

The video is intended to serve as a resource for federally insured credit unions to understand how the proposed changes to NCUA's Prompt Corrective Action rule may affect their risk-based capital (RBC) ratios, the agency said.

Questions addressed in the video include:
  • Why did NCUA propose the rule, and why now;
  • How many credit unions will be impacted; and
  • What are the differences between well-capitalized, adequately capitalized and undercapitalized credit unions under the rule.
CUNA continues to urge credit unions to weigh in on the RBC plan. The NCUA will accept comment on the proposal until May 28.

Working with CUNA's Examination and Supervision Subcommittee, CUNA is developing its own comment letter, which it says will reflect major concerns and present a range of recommendations to make the proposal workable.

The NCUA proposal would make changes to Prompt Corrective Action rules, that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.

Use the resource links for the NCUA video and CUNA's RBC Action Center. CUNA's Action Center features a calculator to help credit unions assess how the proposal will affect their operations, a video explaining the NCUA's plan, and much more.