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NCUA amends mortgage loan investment rules

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ALEXANDRIA, Va. (6/19/09)--Federal credit unions that take part in the U.S. Treasury’s home loan modification program will be allowed to modify second mortgage loans to match the terms of modified first mortgages after the National Credit Union Administration (NCUA) on Thursday voted unanimously to relax some existing lending rules. Although the Treasury recently added a second lien program to its Making Home Affordable (MHA) program, many credit unions could not participate in this program due to NCUA lending rules that “impose a 20-year maturity limit on second mortgage loans that are secured by the member-borrower’s primary residence,” according to a NCUA board action memorandum. As a reaction to this circumstance, the NCUA issued an interim final rule that is limited in scope and will allow credit unions to participate in the MHA's second lien program. Under the final rule, credit unions will be able to modify a second mortgage to match the term of a modified first mortgage--even if it is extended beyond 20 years. The NCUA currently allows credit unions to extend first mortgage loans to as long as 40 years. NCUA Vice Chairman Rodney Hood supported the measure, adding that he gives his full backing to “anything that keeps people in their homes.” The interim final rule will become effective immediately upon publication in the Federal Register. However, the NCUA will accept public comment on the rule and could revise the final rule, if necessary. The board also unanimously supported a recommendation to amend its rules to allow federal credit unions to exclude investments in the Credit Union System Investment Program (CU SIP) and Credit Union Homeowners Affordability Relief Program (CU HARP) from their total assets. Federal credit unions currently use their total assets to calculate their operating fees. This rule is final, and will be effective beginning on Jan. 10, 2010.

Inside Washington (06/18/2009)

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* WASHINGTON (6/19/09)--Under President Barack Obama’s plan for regulatory reform, national banks would be required to comply with consumer protection laws in all 50 states. The plan would allow states to be stricter than the federal government on consumer protection, and state law enforcement agencies could enforce the laws and federal standards against federally and state-chartered institutions (American Banker June 18). Obama’s pre-emption proposal comes as the U.S. Supreme Court decides on the case of Cuomo v. Clearinghouse Association LLC, which will determine whether the Office of the Comptroller of the Currency (OCC) can enforce laws--even state laws--against national banks. The case involves a 2005 investigation by then-New York Attorney General Eliot Spitzer, who requested data from banks to see if they engaged in discriminatory practices. The OCC argued it had visitorial powers, or powers to inspect an entity. The Supreme Court will decide the case this month ... * WASHINGTON (6/19/09)--President Barack Obama’s plan to reshape the financial regulatory system has parts that could be enacted--including creating a consumer protection agency, allowing the government to take over systemically important institutions, eliminating the Office of Thrift Supervision (OTS) and regulating derivatives (American Banker June 18). However, other parts of the plan may not pan out--including eliminating thrift and specialty charters, scaling back national banks’ pre-emption powers and giving the Federal Reserve Board the power to oversee risks in the financial system. House Financial Services Committee Chairman Barney Frank (D-Mass.) said he doesn’t support eliminating the thrift charter. Lawmakers have supported combining the OTS and the Office of the Comptroller of the Currency. However, they have said they want to ensure the charter isn’t used to “play games with,” Frank said, adding that eliminating the charter would be a mistake ...

NCUA registration now open for corporate webinar

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Alexandria, Va. (6/19/09)--Credit Unions that wish to participate in the National Credit Union Administration’s (NCUA) June 24 webinar on its recently implemented corporate credit union stabilization plan may register for the webcast starting today. (See related story: New corp stabilization plan implemented by NCUA.) During the two hour webinar, NCUA Examination and Insurance Director Melinda Love and Office of Corporate Credit Union official Scott Hunt will discuss recent board decisions related to the creation of the temporary corporate credit union stabilization fund and the possible impact that this fund could have on credit unions. The NCUA staff will also give participating credit unions a general corporate credit union update. The webinar will also allow credit union officials direct access to NCUA staff. The audience may submit their questions via the internet, and the NCUA will try to answer as many questions as time allows. Registration for the event will remain open until 12:45 p.m. on June 24. The Credit Union National Association will also stream the webinar live for all attendees of the Americas Credit Union Conference & Expo, which begins this Sunday in Boston, Mass. To register, use the resource link.

High Desert members now served by Alaska USA

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ALEXANDRIA, Va. (6/19/09)--The National Credit Union Administration (NCUA) Thursday approved Alaska USA FCU’s purchase of certain assets and assumption of shares and certain liabilities of High Desert FCU of Apple Valley, Calif. Alaska USA, headquartered in Anchorage, Alaska, will provide uninterrupted service to High Desert members. The NCUA noted in its announcement that it has been overseeing the operations of High Desert since Oct., 16, 2008, when the agency board placed the credit union into conservatorship. The action was taken to protect member assets while addressing operational issues within High Desert. While ensuring safety and soundness, the NCUA said it has been operating the credit union with the goal of continuing credit union service to members through a merger with or purchase by another credit union. Alaska USA FCU was chartered in 1948, is a full-service, $3.9 billion-asset, federally chartered credit union, and has with more than 350,000 members located throughout the United States. Alaska USA has 52 branches in Alaska and Washington and serves its members through over 5,600 shared service center locations nationwide. Founded in 1951, High Desert originally was chartered to serve George Air Force Base in Victorville, Calif., and now serves the residents of San Bernardino County. It has assets of $102 million and serves over 11,000 members.

Frank issues tentative reg restructure hearings schedule

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WASHINGTON (6/19/09)--One day after the Obama Administration released its comprehensive financial regulatory reform proposal to the public, House Financial Services Committee Chair Rep. Barney Frank (D-Mass.) began the reform process in earnest, announcing a tentative schedule for future discussion on the issues. The first of many hearings will begin on the morning of June 24 as the Committee hosts a hearing on consumer issues. The Committee will reconvene after its July 4 district work period by holding a July 9 domestic monetary policy subcommittee hearing on the Federal Reserve’s role. Frank has speculatively scheduled additional hearings on financial regulation restructuring throughout July, beginning with a committee hearing on derivatives set for July 10 and general testimony from financial industry experts and academics on July 13. Markup of the possible regulatory legislation could start in late July, according to the schedule. However, according to the release, additional hearings and committee meetings should continue once the Congress returns to Washington in September. Treasury Secretary Timothy Geithner’s scheduled appearance before the committee, which was scheduled for Thursday, was postponed until a later date due to floor votes.

Assets in CAMEL 45s a growing concern

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ALEXANDRIA, Va. (6/19/09)--There are currently 301 CAMEL 4 and 5 credit unions, which represents an increase of approximately 19% compared to May 2008, according to the National Credit Union Administration’s (NCUA’s) monthly insurance fund report. CAMEL 4 and 5 credit union shares currently represent 3.99% of total
Click to view larger image NCUA Chart
shares insured by the National Credit Union Share Insurance Fund (NCUSIF), an increase from 1.31% for May 2008. NCUA CFO Mary Ann Woodson reported the numbers at the NCUA open meeting Thursday as part of her regular monthly report to the board. Board member Gigi Hyland and Vice Chairman Rodney Hood both voiced concern about possible implications to the insurance fund if the trend were to continue. “Is there a point in time when we start to worry and take certain actions,” Hyland said, adding that staff should begin assessing how the agency should measure that. The NCUSIF’s equity level was at 1.30% as of May 31 and is expected to remain at that level through the rest of the year, according to agency staff. Although the NCUA documents show the NCUSIF ratio continuing at 1.30% for the rest of the year, Woodson said that it will really be closer to 1.20%. She added that that she will revise the numbers now that the board had taken action to implement the Corporate Stabilization Plan. The May numbers show the NCUSIF had budgeted $20 million for natural-person credit union insurance losses in May, although such losses were limited to $10 million for the month. Total year-to-date losses from natural person credit unions is now at $176.5 million, and losses stemming from corporate credit unions remains unchanged at $4.977 billion for the year. Use the resource link below to access the NCUSIF monthly report.

New corp stabilization plan implemented by NCUA

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ALEXANDRIA, Va. (6/19/09)--The National Credit Union Administration (NCUA) will immediately borrow $1 billion of the total $6 billion offered by the U.S. Treasury to shore up the corporate credit union system after the board at its monthly meeting voted to implement the temporary corporate credit union stabilization fund. Commending the board for its work, Credit Union National Association (CUNA) President/CEO Dan Mica said that the board’s action is “precisely what was needed to inaugurate the use of the Temporary Corporate Credit Union Stabilization Fund.”
Click to view larger image NCUA Director of the Office of Examination and Insurance Melinda Love faces Chairman Michael Fryzel (center) as she presents a staff document detailing a proposal to implement the new Temporary Corporate Credit Union Stabilization Fund. Key NCUA staff members also concentrate on the presentation. They include Sarah Vega, chief of staff and senior policy advisor (far right), General Counsel Bob Fenner, and Executive Director David Marquis. (CUNA Photo)
During the meeting, NCUA officials said that the board should examine the impact that the extra $1 billion in corporate credit union funding has on the system before borrowing further money from the Treasury. Taking the full $6 billion in available funding would limit the availability of future Treasury funding, Office of Examination and Insurance Director Melinda Love said. The $1 billion in borrowed funds would be used to “secure the re-assignment” of the National Credit Union Share Insurance Fund’s (NCUSIF) capital note at U.S. Central Federal Credit Union. This so-called “re-assignment” would increase the NCUSIF’s equity by $1 billion, according to an NCUA memorandum. Under the plan, credit unions will also see their earnings recovered from the NCUSIF returned to them, for a total equal to 0.69 percent of their insured shares at the end of 2008. These earnings will then be used to recapitalize the NCUSIF. Related accounting issues were also discussed during the meeting, with the NCUA determining that any costs and liabilities related to corporate credit unions stabilization that were previously borne by the share insurance fund will be transferred to the stabilization fund. Credit unions’ one percent deposits in the NCUSIF will no longer be accounted for as impairments under the plan. CUNA believes that credit unions will not be required to provide restatements of their prior financial statements. Rather, many credit unions will record a gain in the second quarter equal to the impairment charge they recorded in the first quarter, allowing them to reflect no impairment charges on their year-to-date income statements. The stabilization fund will also allow the NCUA to reduce its share insurance premium, which was expected to be assessed in September of this year, to an estimated 15 basis point charge. The NCUA previously announced that there would be a 30 basis point charge assessed in September. However, the NCUA said that the exact amount of the premium would depend on a number of factors, including insured share growth and insurance losses at natural person credit unions. The NCUA will soon provide further details on how these actions will affect credit union financial reporting, with the goal of allowing credit unions to accurately account for the affects on their mid-year call reports, which are due in late July. The NCUA staff has been working with accounting practitioners on the specifics of how credit unions will account for these changes, and details will be forthcoming from the Agency and accounting professions in the next few weeks. The NCUA will also give credit unions direct access to NCUA board members during an interactive webinar set for June 24. Credit unions that would like to participate in this webinar may register at the NCUA's Web site starting today. (See related story: NCUA opens registration for June 24 webinar.) “Rather than taking a significant hit to earnings and capital this year based on estimates of future losses, credit unions will now be able to pay for those losses on a timetable much more closely aligned to when and if they actually occur,” Mica added.

Treasury wants NCUA independent (06/18/2009)

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WASHINGTON (6/18/09)—The U.S. Treasury’s report on financial regulatory reform, released to the public on Wednesday, would allow the National Credit Union Administration (NCUA) to maintain its safety and soundness authority over credit unions.
In front of an executive mansion gate, CUNA President/CEO Dan Mica answers a reporter’s question on the Obama administration’s financial regulatory restructuring plan directly after Mica left the president’s briefing at the White House. Mica says CUNA will "take a very close look at the details surrounding this proposal" and will “represent credit unions throughout the reform process." (CUNA Photo)
This confirms what Treasury officials told Credit Union National Association (CUNA) President/CEO Dan Mica and other senior CUNA staff last week. Noting that the ongoing economic uncertainty provides an “opportunity for restructuring that will genuinely produce improved regulation,” NCUA Chair Michael Fryzel said that the Obama administration's proposal “merits serious consideration.” The continued independence of the NCUA and the proposal’s plan to create a consumer protection council will “serve to ultimately improve the safe and sound operations of the U.S. financial system,” he added. CUNA Senior Vice President of Legislative Affairs John Magill said that the report's lack of recommendation for substantive changes in the safety and soundness of regulations for credit unions affirms that "credit unions were not the cause of nor a contributor to the financial crisis." "I am not sure they could be clearer in their intent that NCUA remain an independent regulator than to say at least twice in the document," Magill said. But he also advised credit unions that the administration's proposal would not be "the last word on regulatory restructuring." Magill noted, "Congress is going to have its say over the next weeks and months, and we will continue to monitor this very closely." Ryan Donovan, vice president of legislative affairs for CUNA, said that the potential consolidation of some existing regulations could reduce costs and lessen the regulatory complexity faced by many
Click for videoDan Mica on intial reactions to the Financial Regulatory Reform proposal. Click for video. (Photo provided by CUNA)
credit unions. However, CUNA has not fully analyzed these proposals, and an official statement on these portions of the Treasury proposal has not yet been released. CUNA will also solicit input from its member institutions in the coming days, and and will work to ensure that any of the resulting regulations are not duplicative, Donovan added. To help launch what is sure to be a thorough vetting of the plan's intricacies, the Senate Banking Committee and the House Financial Services Committee have scheduled Treasury Secretary Timothy Geithner to appear before them in separate hearings today to discuss the Obama plan. Following an afternoon briefing at the White House, CUNA President and CEO Dan Mica said that while CUNA is “grateful” for the administration’s decision to grant continued independence to the NCUA, CUNA will “take a very close look at the details surrounding this proposal” and will represent credit unions throughout the reform process “after discussing the proposal fully” with CUNA members. CUNA's Governmental Affairs Committee is scheduled to review aspects of the proposal later today. For video of Mica’s statement following the White House briefing, use the resource link.