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Cheney Report: CUs Concerned About Call Report Changes

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WASHINGTON (6/10/13)--Credit unions are concerned that a rule going into effect June 30 that changes how credit unions define delinquent loans in call reports could drive up the number of reportable loans for some credit unions, Credit Union National Association President/CEO Bill Cheney said in the most recent issue of The Cheney Report.

CUNA has brought the matter to the attention of senior NCUA staff, Cheney said.

Under the change announced last October, the definition of a delinquent loan will be based on the number of days delinquent--60--rather than the number of months--two.

The NCUA approved the change to bring its definition into line with that of the federal bank regulators.

"The effect, however," Cheney notes, "is that a seemingly nominal change is driving up the number of reportable loans for some credit unions. This is a particular problem for real estate loans, which are typically due on the first of the month."

Using days instead of months to determine reporting can significantly affect the timing of when and if these loan must be reported as delinquent.

Cheney noted that one credit union told CUNA the change would more than double its delinquency rate on the June report.

CUNA's Examination and Supervision Subcommittee, as well as CUNA staff, will continue to pursue the issue with the NCUA.

Use the resource link to read the full Cheney Report.

CUNA Survey Seeks CU Comments On CFPB Ability-to-repay, QM Rule

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WASHINGTON (6/10/13)--Credit unions are asked to provide details on what actions they plan to take as a result of the Consumer Financial Protection Bureau's pending ability-to-repay and qualified mortgage (QM) rules through a new Credit Union National Association survey.

In the survey, CUNA asks credit unions to estimate what percentage of their loan volume falls outside of the QM loan definition. Credit unions can also suggest ways the CFPB could adjust the rule to provide greater flexibility.

The survey also seeks general credit union contact information and asset size details.

CUNA has asked that credit unions complete the survey by June 14. For the full survey, use the resource link.

The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules in January. The rule amended Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). It also establishes certain protections from liability under this requirement for "qualified mortgages."

The rule provides credit unions and other creditors that follow the QM standards with a "safe harbor" for compliance with the ATR provisions. Creditors will be entitled to greater legal protection for QMs than for other mortgage loans should the creditor be sued by a consumer for noncompliance with the ability to repay provisions.

NCUA Derivatives Details Discussed In CUNA Audio Conference

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WASHINGTON (6/6/13)--The National Credit Union Administration's recently released derivatives proposal was one of many topics discussed by Credit Union National Association staff during a "Pressing Regulatory and Compliance Issues Audio Conference" held last week.

CUNA is particularly interested in how the proposal would address the use of outside vendors and how fees collected by the agency would be spent. CUNA in recent meetings with the agency has also asked the NCUA how existing staffing levels would be adjusted to deal with derivatives supervision.

The NCUA derivatives proposal, released at the May open board meeting, would allow well-run federal credit unions to use simple derivatives to hedge against interest rate risks. The NCUA plan would allow only well-managed credit unions with $250 million or more in assets, and which have appropriate expertise, to apply for an agency derivatives investment program. Swaps and caps will be the only approved investments. Fees will be charged to cover costs related to application processing and supervision of the program.

Around 75 to 150 credit unions would apply for derivatives authority within the first two years of the program, the NCUA has estimated. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.

CUNA staff during the conference said the NCUA kept the derivatives proposal simple to release it in a more timely fashion. The agency is particularly interested in credit union comments on fees and asset level cutoffs, CUNA staff said.

The audio conference also featured:
  • An update on U.S. Congress tax discussions;
  • The latest on Consumer Financial Protection Bureau regulatory actions; and
  • Discussion of other key legislative and regulatory topics.
An archived version of the conference will be released later this week.

Senate Panel Looks For Community Bank Lessons From Financial Crisis

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WASHINGTON (6/10/13)--Sen. Tim Johnson's (D-S.D) banking panel has scheduled a look this Thursday at "Lessons Learned From the Financial Crisis Regarding Community Banks."

The scheduled witnesses at the 10 a.m. (ET) Senate Banking Committee hearing are:
  • Richard Brown, chief economist, of the Federal Deposit Insurance Corp.;
  • Jon T. Rymer, inspector general, also of the FDIC; and
  • Lawrance L. Evans, director of Financial Markets and Community Investment, of the U.S. Government Accountability Office.
Currently, the June 13 event is the final hearing for scheduled for Senate Banking for June.  The U.S. Congress will recess for a July 4 District Work Session.

CFPB Publishes Loan Originator, Mortgage Servicing Compliance Guides

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WASHINGTON (6/10/13)--Plain-English, small-entity compliance guides detailing recent changes to loan originator and mortgage servicing rules were released by the Consumer Financial Protection Bureau on Friday.

The guides give an overview of the rules, but are not substitutes for the underlying rules, the CFPB emphasized. The Credit Union National Association is reviewing the guidance and will be following up with the CFPB on any issues of concern.

Similar plain-English guides on ability-to-repay and qualified mortgage rules, escrow regulations, and changes to the Home Ownership and Equity Protection Act, the Equal Credit Opportunity Act, and sections of the Truth in Lending Act that impact higher-priced mortgage loan appraisals have also been released by the bureau.

The CFPB said it plans to update the guides periodically as rule clarifications are finalized. The new documents are part of a series of guides and other informational materials the CFPB plans to provide on its new mortgage regulations.

The bureau has said the goal of the guidance series is to provide a comprehensive rule summary in a plain language and frequently-asked question format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.

Use the resource link below to access the loan originator and mortgage servicing guides.

Matz Pledges Agency Support For Small CUs, CDCUs

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BALTIMORE, Md. (6/10/13)--Community development and other small credit unions promote economic empowerment and "are often the only federally insured institutions in low-income communities," and the National Credit Union Administration will continue to support them, NCUA Chairman Debbie Matz told attendees of the National Federation of Community Development Credit Unions' 39th Annual Conference on Serving the Underserved on Friday.

The NCUA currently aids these institutions through regulatory relief measures, shorter examinations, streamlined low-income designations, and expanded services from the Office of Small Credit Union Initiatives, she said.

"Your mission is more important than ever," Matz said. "As long as you stay true to your mission of member service, while NCUA stays true to our mission of safety and soundness, the future will be as rewarding as the past," she added.

"Low-income credit unions continue to lead the nation in loan growth, while charge-offs remain below the national average. Among credit unions that have had a low-income designation since 2009, return on average assets doubled," Matz said.

The NCUA chairman also discussed many of the challenges faced by small credit unions, including capital losses. "More than a third of credit unions under $50 million in assets are unprofitable," she noted. "That means they're losing capital, and if they're losing capital, they're in danger of falling below the Prompt Corrective Action (PCA) threshold."

Credit unions that fall below the PCA threshold face long odds against recovering while remaining independent, Matz emphasized. To protect their future, she encouraged small credit unions to maintain a capital cushion well above 7%. Credit union directors and management should also "develop a sound strategic plan, design strong internal controls, and practice thorough due diligence" to create a capital cushion, she added.

For Matz's full remarks, use the resource link.