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Regs exams discussed at NCUA listening session

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ALEXANDRIA, Va. (5/10/12)--Regulatory burdens, examination concerns and how the National Credit Union Administration (NCUA) plans to address some current credit union priorities were addressed during the NCUA's second listening session held Wednesday.

The meeting was attended by about 70 credit union officials and 30 NCUA staff members.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn, West Virginia Credit Union League President/CEO Ken Watts, and representatives from the New Jersey, D.C./Maryland, and Pennsylvania credit union leagues were among those at the session.

Minimizing regulatory burdens and improving the examination process were again consistent themes. Credit union representatives said they were particularly concerned about the agency's pending loan participation and credit union service organization proposals. 

The NCUA has already indicated that it is revisiting those proposals and will be making changes, Dunn said. A major area of concern in the loan participation proposal has been the 25% ceiling on purchasing loan participations from any one originator. CUNA strongly opposed this and other provisions, and CUNA is meeting with senior NCUA staff to discuss this and other matters early next week.

Attendees said the NCUA should provide additional regulatory relief, including for member business lending (MBL). The NCUA said it is considering raising the ceiling on its definition of small credit unions to $18 million to $20 million in assets and removing the requirement for a personal guarantee on MBLs, a move that CUNA commends and has advocated for several years.

NCUA Chairman Debbie Matz said the agency wants to listen to credit unions, and to be mindful of their need do [their] business." NCUA Director of Examination and Insurance Larry Fazio added that "examiners need to listen better and more…but both parties (credit union officials and NCUA examiners) need to listen."

Fazio also addressed a specific issue of interest to most credit unions that have been recently examined… the issuance of Documents of Resolution (DoR) by their examiner.  "We are working to clarify the DoR process," Fazio told the group.  "We shouldn't regulate every aspect of risk management," he added.

Attendees also recommended that the NCUA:

  • Give credit unions advance notice when their examiner has been replaced;
  • Do more to survey credit unions following their last exam regarding the examination experience;
  • Reinforce that actions taken by NCUA examiners should reflect the agency's own rules and policies; and
  • Request that its examiners have a dialogue with the credit union's management about the credit union's strategic plan before the exam starts.
Attendees also recommended that the NCUA provide a letter to credit unions at the beginning of each year, along with the yearend financials from the previous year, that addresses examination trends and concerns the agency will flag that year through policies or other actions. A similar regulatory roadmap should be provided by the Consumer Financial Protection Bureau, they added.

Some of the recommendations received favorable reactions from Matz and NCUA staff, Dunn noted.

NCUAs Hyland to chair NeighborWorks America

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ALEXANDRIA, Va. (5/10/12)--National Credit Union Administration (NCUA) board member Gigi Hyland has become the board chair of NeighborWorks America, an affordable housing and community development organization.

Hyland has been the NCUA's representative to the NeighborWorks board since 2008, and she succeeds Thomas Curry as chair.  In announcing her appointment, Hyland said, "I look forward to continuing the work begun by Tom to prevent foreclosures where possible, create more affordable housing, and stabilize communities around the country."

NeighborWorks America works to provide access to homeownership and to safe and affordable rental housing. In the past five years, NeighborWorks' affiliated organizations have generated more than $19.5 billion in reinvestment in their communities, according to a release, which also stated that NeighborWorks America is the nation's leading trainer of community development and affordable housing professionals.

Determined by statute, NeighborWorks America's board consists of the heads of the financial regulatory agencies and the U.S. Department of Housing and Urban Developoment, who are presidential appointees subject to Senate confirmation, or their statutorily designated representatives.

NCUA letter provides IRR rule answers

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ALEXANDRIA, Va. (5/10/12)--The National Credit Union Administration (NCUA) explains its new interest rate risk regulations and advises credit unions on how to prepare for the new rules before they become effective this fall, in a new letter to credit unions (12-CU-05).

The letter is intended to assist credit unions in determining if they are subject to the new rule. The agency also included information on the questionnaire its examiners will use when they determine whether a covered credit union is complying with the IRR regulation.

The NCUA in January amended its federal share insurance regulations to include a requirement that federally insured credit unions have both a written IRR policy and an effective IRR management program. Credit unions with less than $10 million in assets are exempted from the new regulation. A credit union with between $10 million and $50 million in assets is only subject to the requirements if its first mortgage loans plus investments with maturities over five years equal or exceed 100% of its net worth.

NCUA staff have stressed that the IRR rules will not be "one-size-fits-all," and that the NCUA is providing flexibility for credit union managers and board members to develop their own policies.

Also, while the NCUA could withhold National Credit Union Share Insurance coverage of member accounts for credit unions that do not comply with the proposal, this would only happen in the most extreme of cases, the agency has said.

The Credit Union National Association will be monitoring the implementation of this rule very carefully. The rule will become effective on Sept. 30.

For the full letter to credit unions and the related questionnaire, use the resource link.

Unneeded regs costly for CUs members CUNA witness

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WASHINGTON (5/10/12)--The burden of excessive financial regulations has resulted in more than $2 million in additional costs for his credit union, and, in some cases, reduced service to members, Terry West, president/CEO of Vystar CU, Jacksonville, Fla., said during a Wednesday House subcommittee on financial institutions and consumer credit hearing on the impact of regulations on small financial institutions.

West, testifying on behalf of his credit union and the Credit Union National Association (CUNA), said Vystar wants to do right as a credit union, but is often challenged by the ever-changing regulatory environment.

Vystar CU  CEO Terry West, right, told House subcommittee chair Rep. Shelly Moore Capito (R-W. Va.), left, and other subcommittee members of the burdens that unneeded regulations have created for his credit union and its members. (CUNA Photo)

Credit unions have been "battered by the volume of regulatory changes" that have been made in recent years, he said. West estimated that credit unions have been subjected to in excess of 120 regulatory changes from at least 15 different federal agencies since 2008, and they are bracing for the next wave, which will occur once the Consumer Financial Protection Bureau (CFPB) hits its stride, he said.

"We have tried to estimate the cost and found it complicated because compliance reaches into so many areas," West said, adding that "after $2 million we stopped trying."

Regulatory compliance demands have resulted in the creation of new positions at Vystar, West said. In addition to its senior risk position, "we created a vendor management department, increased our Bank Secrecy Act staffing and are about to increase our number of information security officers.  We have had to increase staff because of compliance and the costs keep on coming," he said.

While his credit union does all it can to avoid increasing costs for members, Vystar was recently forced to increase the price it charges for remittances to pay for the cost of compliance. Vystar also has been forced to hold some mortgage rates steady, rather than lowering them, due to the cost of compliance.

Members are sometimes troubled by the additional time that certain regulations add to the mortgage approval process. West said his credit union recently was forced to delay offering some new products to members to give his staff more time to deal with compliance issues.

He was joined by First United Bank & Trust CEO William Grant, SRP FCU CEO Ed Templeton, First State Bank Chief Investment Officer Samuel Vallandingham, and Georgetown University law professor Adam Levitin during the hearing.

When prompted by Rep. David Scott (D-Ga.), the witnesses said eliminating outdated ATM disclosure regulations and modifying pending qualified mortgage regulations would be a good start to meaningful regulatory relief.

West in his testimony urged the CFPB to consider using its statutory authority to exempt credit unions and other financial institutions from new regulations, and to establish appropriate transaction thresholds, as needed.

Rep. Carolyn Maloney (D-N.Y.) asked if greater regulatory scrutiny of nonbank lenders would help traditional institutions, and the witnesses agreed that it would. West said making nonbank lenders subject to new regulations would be beneficial, as that change would allow credit unions to reach out to potential new members before they go to nonbank lenders.

For prepared testimony from West and other witnesses, use the resource link.

Inside Washington (05/09/2012)

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  • WASHINGTON (5/10/12)--The Obama administration pressed Republicans to pass legislation to make refinancing easier for troubled homeowners. During a speech in Albany, N.Y., President Barack Obama introduced a job-creation to-do list for Congress, which included passing the legislation. "First, Congress needs to help the millions of Americans who have worked hard, made their mortgage payments on time, but still have been unable to refinance their mortgages with these historically low rates," Obama said. "This would make a huge difference for the economy." The president estimated homeowners who refinanced would save at least $3,000 a year. In testimony before the Senate Banking Committee, Housing and Urban Development Secretary Shaun Donovan described how three proposed refinancing bills would help troubled homeowners (American Banker April 9). None of the bills have been introduced yet. One proposal would allow homeowners whose mortgages are not owned by Fannie Mae or Freddie Mac to refinance into a government-backed loan. Another measure would remove existing barriers to refinancing for homeowners whose loans are already backed by Fannie or Freddie. The third measure offers an incentive for borrowers to rebuild equity in their homes by taking loans of shorter duration when they refinance …
  • WASHINGTON (5/10/12)--Lawmakers on Tuesday argued about whether Congress or the Federal Reserve deserved more blame for the continuing high unemployment rate. Rep. David Schweikert (R-Ariz.), said the Fed has assumed Congress' traditional role in managing fiscal policy (American Banker April 9). Rep. Kevin Brady (R-Texas) has introduced a bill that would limit the Fed's focus to inflation and allow Congress to manage unemployment. Rep. Barney Frank (D-Mass.) pushed a counterproposal under which Federal Reserve Bank presidents would not vote at Federal Open Market Committee meetings.  Frank argued that because Federal Reserve Bank presidents are not nominated by the president and confirmed by the Senate, they should not have a significant role in the country's fiscal policy. But Frank also said Congress had failed to "step up" in addressing unemployment …
  • WASHINGTON (5/10/12)--The U.S. Small Business Administration is offering free networking and educational forums and dialogue with leading business experts during National Small Business Week, May 20-22 in Washington, D.C. The forums include a town hall with SBA Administrator Karen Mills on why small businesses are good for the long-term health of any economy; a social media forum on best practices for putting new media tools to work for small businesses; and an exporting forum on how SBA can help businesses find customers abroad.  The schedule also includes sessions on federal contracting, selling to large companies, and business matchmaking with major corporations and government agencies. The town hall and forum events will be webcast live to allow business owners across the country to participate if they cannot attend in person. While registration is required to attend forums and sessions in person, the live online webcast will be available free at To register to attend, find more information on the live webcast, or for a detailed schedule of events and speakers, visit the National Small Business Week website. The Credit Union National Association (CUNA) and credit unions are urging Congress to increase their MBL cap to 27.5% of assets from 12.25%, to allow credit unions to make more loans. CUNA estimates that lifting the cap would infuse $13 billion into the economy through small business loans and help create 140,000 jobs.…
  • WASHINGTON (5/10/12)--The Community Development Financial Institutions Fund (CDFI Fund) Wedesday released a study conducted by the U.S. Government Accountability Office (GAO), which examined whether the Community Development Financial Institutions Program (CDFI) and the New Markets Tax Credits Program (NMTC) were meeting goals set for proportionally awarding organizations that serve rural areas. The "study found that the CDFI Fund has met or exceeded its rural proportionality goals," said CDFI Fund Director Donna J. Gambrell. "This is a testament to the CDFI Fund's commitment to providing financing to revitalize all struggling communities, urban and rural alike." U.S. House Report 112-136, referenced by the Consolidated Appropriations Act of 2012, requires that GAO conduct a study on the concentration of CDFIs and NMTCs in urban areas and comment on the extent that program design, administration, or history contributed to the early establishment of CDFIs in urban areas. The GAO study found that the CDFI Program has a successful review process and established goals of matching the proportion of awards to the proportion of qualified applicants that primarily serve nonmetropolitan areas. The full summary can be found here ...