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NCUA closes St. Luke Baptist FCU

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ALEXANDRIA, Va. -- The National Credit Union Administration (NCUA) placed St. Luke Baptist FCU of Laurelton, New York, into liquidation May 3. NCUA announced that its Asset Management and Assistance Center will issue checks to members holding verified share accounts in the St. Luke Baptist FCU within one week. Through NCUA’s National Credit Union Share Insurance Fund, credit union member deposits are insured up to at least $100,000 per account. NCUA made the decision to liquidate St. Luke Baptist and discontinue its operations after determining the credit union is insolvent. It has no prospects for restoring viable operations. At the time of liquidation, the credit union served 162 members and had assets of approximately $49,734. Chartered in 1976, the credit union served members of the St. Luke Baptist Church located in Laurelton, N.Y.

CU support helps in latest elections

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WASHINGTON (5/7/08)—Two new House members from Louisiana, one a Democrat, the other a Republican, who won their special elections contests over the weekend each had support from the Credit Union National Association (CUNA). Newly elected Reps. Steve Scalise, a Metairie Republican, and Don Cazayoux, a New Roads Democrat, will be sworn in this week after winning special elections last Saturday. Both new House members had strong backing from the Louisiana Credit Union League, and CULAC, the CUNA’s political action committee (PAC). CULAC contributed $10,000 to Scalise’s effort and $5,000 to Cazayoux’s campaign. While Scalise easily won his general election against Democrat Gilda Reed with 75% of the vote, CUNA Political Director Trey Hawkins said credit unions’ support was crucial in an earlier competitive GOP primary in April. Cazayoux’s narrow victory, winning 49% - 46% over Republican Woody Jenkins, was the subject of broad national attention. The victory placed into the hands of Democrats a Louisiana seat that long has been held by the GOP. It was the second Democratic pickup of a Republican-held seat in recent months. Hawkins said this week that, in both the Scalise and Cazayoux elections, credit unions’ backing of the winners should help Louisiana’s credit unions begin their relationships with the newest members of their delegation on a strong footing. Both elections were prompted by vacancies in Louisiana’s congressional delegation. Scalise is filling the First District seat vacated when Bobby Jindal was sworn in as Governor. Cazayoux will complete the term of Sixth District Rep. Richard Baker, who resigned earlier this year to take a job as CEO of a trade association in Washington.

Inside Washington (05/06/2008)

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* WASHINGTON (5/7/08)--Top mortgage lenders were scheduled yesterday to meet privately with the Treasury Department to discuss second liens. Servicers were expected to suggest trading second liens so first-lien holders can tackle their outstanding debts (American Banker May 6). Second liens must be eliminated before a primary mortgage loan is modified. Yesterday’s meeting follows up an April 24 meeting called by Treasury Secretary Henry Paulson. Paulson met with Treasury undersecretary Robert Steel and with executives from several top mortgage lenders ... * WASHINGTON (5/7/08)--A package of mortgage reforms could be enacted as early as June, said House Financial Services Committee Chairman Barney Frank (D-Mass.) at a Mortgage Bankers Association conference this week (American Banker May 6). A package of bills containing reform for the Federal Housing Administration and the government-sponsored enterprises, and a bill that would allow lenders to write down mortgages to help troubled borrowers refinance, are expected to hit the House floor today. Frank also noted at the conference that he wants to hold a hearing later this month with the Securities Industry and Financial Markets Association ... * WASHINGTON (5/7/08)--The Office of Federal Housing Enterprise Oversight (OFHEO) Tuesday reduced Fannie Mae’s minimum capital requirements to 15% from 20%, which resulted in Fannie rising 8.9%. On the same day, Fannie posted a quarterly loss of $2.19 billion before preferred dividends. The enterprise reduced its dividend to 25 cents from 35 cents and plans to sell $4 billion of common and convertible preferred shares (Bloomberg May 6). OFHEO also lifted Fannie’s 2006 Consent Order ... * WASHINGTON (5/7/08)--Congress needs to be more flexible with federal agencies as they oversee the troubled mortgage market, said Federal Reserve Chairman Ben Bernanke at a Columbia Business School event in New York (The New York Times May 6). Agencies should be more innovative in helping the market, and should give the Federal Housing Administration more power to set standards and adjust rates for owners who want to refinance their mortgages, he said. Bernanke also added that Fannie Mae and Freddie Mac could help the market by raising money to help borrowers facing foreclosure ...

NCUA One percent ROA not holy grail

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WASHINGTON (5/7/08)—-In the current economic environment, the National Credit Union Administration (NCUA) expects credit unions to have lower return-on-average-asset (ROA) ratios--and that’s OK. “Credit unions have high net worth, and using your capital appropriately to deal with this very severe market dislocation is OK,” said NCUA Board Member Gigi Hyland during a CUNA webinar titled, “CU Response to the Current Economy: NCUA/Compliance.” NCUA Director of the Office of Examination and Insurance Dave Marquis and CUNA Chief Economist Bill Hampel also participated in the Friday event, which now is archived. “One percent ROA is not and cannot be a holy grail anymore, especially in this market,” said Hyland, who reiterated the agency’s August 2006 evaluation of earnings letter to credit unions. That NCUA supervisory letter clarified that agency examiners are expected to evaluate each credit union's earnings level relative to net worth needs, financial and operational risk exposures, the current economic climate, and the institution's strategic plans. Overall, U.S. credit union net worth is expected to fall to about 11% by December 2008, which remains “a very strong capital cushion, putting credit unions in a very good position,” according to CUNA’s Hampel. This cushion will be important as credit union return on average assets dips. ROA at the end of 2007 was 64 basis points--a decline from 82 basis points at the end of 2006. However, the economist noted that in the fourth quarter of 2007 alone, loan loss provisions drove ROA down to 0.32%. Hampel projects year-end ROA of 0.53% in 2008 and 0.70% in 2009. Hyland said the agency is “very keen and supportive” of credit unions continuing to be the trusted financial partner of their members. “If you have an opportunity to help a member in need, we urge you to rework their loan in the context of the credit unions business policies and also that fits the member’s needs,” said Hyland, who reiterated that credit unions are not part of the current mortgage problem because they have appropriately focused on members. In his economic analysis, CUNA’s Hampel said the U.S. economy, for all practical purposes, is in a recession for the first half of this year. “For most of this year and most of next year, the economy is going to look and feel very weak--much like a recession,” he said. “Therefore your members will act as if we’re in a recession--that’s what matters.” The credit crunch--a condition where even people with good credit have difficulty getting a loan-—has spread to the rest of the economy. “This has made things worse,” said Hampel. However, noted the economist, this condition has created an opportunity for credit unions. “If other lenders are less willing to lend to good credits, there may be opportunities for credit unions to lend to those members who otherwise would have borrowed from someplace else,” said Hampel. The recovery should begin in the second half of this year, mostly fueled with Federal tax rebates. Hampel warned however that once consumers spend the rebates, the economy could sputter again. Hampel’s outlook for credit unions through 2009:
* Faster saving and asset growth; * Slower loan growth; * Significant increases in loan delinquencies and losses; * Substantial downward pressure on net income; and * Falling net worth ratios.
Looking forward, Hyland said the agency’s two areas of exam focus will be strategic planning and the evaluation of third party relationships. The credit union products currently showing the most signs of stress are home equity lines of credit--especially variable rate loans--mostly in areas where home values have dropped, according to NCUA’s Dave Marquis. Under the risk focused exam process, Marquis said the NCUA is shifting resources to areas hardest hit, especially California, Florida, Nevada and Arizona. Use the link below to access the complete archived CUNA webinar.