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Mortgage fraud sweep includes CU cases

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WASHINGTON (6/21/10)--A nationwide government mortgage fraud sweep called Operation Stolen Dreams has resulted in 191 civil enforcement actions and the recovery of more than $147 million, said the interagency Financial Fraud Enforcement Task Force Thursday. The sweep has credit union ties, namely the now-defunct U.S. Mortgage Corp. and its subsidiary, Credit Union National Mortgage. Nineteen credit unions, Fannie Mae and others lost about $140 million in the fraud involving the two Pine Brook, N.J.-based companies that provided mortgaging services to credit unions. The companies filed for a Chapter 11 bankruptcy in February 2009 in Newark. The filing documents listed more than $200 million in debts to Fannie Mae and credit unions. Michael McGrath, president, and Leroy Hayden, the servicing manager of the companies pleaded guilty to conspiring to fraudulently sell credit union loans to Fannie Mae and use the proceeds to finance U.S. Mortgage's operations as well as investments for himself and the company (News Now June 12, 2009). They are awaiting sentencing. The case is one of seven examples in the announcement made by President Barack Obama's task force. Operation Stolen Dreams targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever in confronting mortgage fraud, said Attorney General Eric Holder, Federal Bureau of Investigation (FBI) Director Robert Mueller, Housing and Urban Development Inspector General Kenneth M. Donohue and other members of the task force. Since it began on March 1, Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses, said the group. So far, 673 indictments have been made in 135 complaints, with 336 convictions. About 206 of the fraudsters have been sentenced. Total dollars seized during the investigation is $10.7 million. In civil cases, the sweep had dealt with roughly 395 defendants, 191 enforcement actions that included cease and desist orders, and $196.7 million recovered. However the amount includes some judgments that have been suspended based on the defendants' inability to pay, said the task force. Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases but also on civil enforcement, recovering money for victims, and increasing cooperation with state and local partners. "From home buyers to lenders, mortgage fraud has had a resounding impact on the nation's economy," said FBI's Mueller. "The last several years have seen enormous and damaging developments in the mortgage and housing markets, and the government has stepped in to bolster unstable marketplaces and devastated communities," said Donohue. Other examples in Operation Stolen Dreams include:
* A builder bailout scheme in Chico, Calif., that involved a large-scale builder buyout fraud. Anthony G. Symmes has pleaded guilty to mail fraud conspiracy and money laundering. * Miami mortgage fraud targeting the Haitian-American community, in which Yolette Antoine and Constance Powell are charged with executing false quit-claim deeds transferring title to The Antoine Investment Group. * Detroit "ghost loans" mortgage fraud scheme in which Ronnie Edward Duke and about 70 co-conspirators allegedly defrauded 61 financial institutions throughout the U.S. by recruiting straw buyers for 500 mortgages on 180 properties totaling more than $100 million. The group placed multiple "ghost loans"--unrecorded loans--on one residential property without the other lender's knowledge. * Duluth, Minn., loan modification scheme involving former mortgage broker Michael Fiorito, who was sentenced to 270 months in federal prison for the equity skimming scheme that stole about $400,000 from homeowners who believed they were only refinancing their homes, not selling their homes without their knowledge. * The $108 million Countrywide settlement in which two Countrywide mortgage servicing companies settled charges that they inflated fees on cash-strapped homeowners whose mortgages were serviced by Countrywide, made false or unsupported claims about amounts owed by borrowers in bankruptcy, and charged fees to borrowers that were not disclosed until the companies tried to collect the fees after the borrowers' bankruptcy. * Reverse mortgage scheme in Atlanta, Ga., that targeted the elderly. The case is the first prosecution involving alterations to a Multiple Listing Service routinely relied on by appraisers, realtors, tax assessors and others in the mortgage industry to establish accurate property valuations. Kelsey Hull and Jonathan Kimpson pleaded guilty in the scheme, They allegedly profited from the corruption of a Federal Housing Administration-insured program for older homeowners by faking down payments, arranging inflated appraisals to create bogus equity up to $100,000 in the properties securing the reverse mortgage loans, and diverting the proceeds to themselves.

ISmartMoney.comI Free checks harder to find check CUs

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NEW YORK (6/21/10)--Banks are preparing new fees on basic banking services to recoup revenue losses from the financial crisis and from new regulations. Free checking may become harder to find. But consumers can turn to credit unions to mitigate the fee hikes, said two national finance publications last week. Articles in SmartMoney.com (June 17) and Bankrate.com (June 18) pointed out that banks are starting to charge for checking accounts, especially for low activity or balances below a minimum. Some will offer tiered fees, based on how much a consumer uses their services. "Credit unions, online banks and smaller community banks will continue to be viable alternatives either for free checking accounts, or very low cost accounts--with low hurdles to avoid fees," said Greg McBride, Bankrate.com senior financial analyst, in the Bankrate article. Bankratesaid that "for banking customers simply looking for an inexpensive place to park cash from time to time, smaller banks and credit unions may offer a banking experience more in line with their lifestyle." "As Bankrate recently found, 39 of the 50 largest credit unions offer free checking accounts," said the article. "And that will continue to be a viable alternative for consumers looking to obtain free checking or avoid fees that may be instituted on their current checking account relationships," said McBride. In SmartMoney.com, McBride noted that credit unions and smaller community banks are more likely to offer free checking with fewer strings. Consumers must keep in mind that "if you think you can't join a credit union, you may be wrong about that," said Linda Sherry, spokeswoman for Consumer Action, a financial literacy advocacy group. The article pointed readers to the website for the Credit Union National Association (CUNA) and linked to CUNA's CU Locator site. MoneyRates.com data indicate that the average minimum balance required for a free checking account has been creeping up to $4,621.05 as of January--a 7.85% increase in the past six months, said the SmartMoney article. It advises consumers faced with increased fees for checking to: shop around, move money out of savings into checking to increase their balance, bundle services with one financial institution; and bank online and use debit cards, which cost less to process. To review the articles, use the links.

Auditor responds to NCUA suit in New London failure

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NEW HAVEN, Conn. (6/21/10)--The auditors of the defunct New London (Conn.) Security FCU have filed a response to an amended lawsuit by the National Credit Union Administration (NCUA) in which NCUA alleges an unqualified auditor failed to act on a fraudulent situation for years before the credit union collapsed in 2008. The defendants in the suit--filed in the U.S. District Court, District of Connecticut, New Haven--are the credit union's former auditor, Beller, Shepatin & Co. P.C.; an employee at the firm, Robert Shutsky; and Ed Lorah & Associates LLC, a firm that is successor in interest to the Beller firm, which Lorah bought in 2007. In the response filed on June 11, the defendants' attorneys Marisa Lanza and Andrew F. Pisanelli denied NCUA's allegations of professional malpractice and breach of contract in performing audits and reviews of the credit union's financial statements. NCUA's suit alleges that Shutsky was unqualified and lacked the proper and necessary training and knowledge to perform auditing and review services, according to its amended complaint filed April 8. "As a result of the defendants' professional malpractice, and breach of contract, the credit union's investment in a fraudulent investment account went undetected for many years," said the complaint. "As a consequence of the defendants' professional malpractice, and breach of contract, the credit union was unable to prevent or mitigate the damages caused by the fraudulent investment account, ultimately losing virtually all of its assets," NCUA had charged. The fraudulent activity centered on assets in A.G. Edwards & Sons, which became Wachovia Securities (now Wells Fargo) in 2007. A.G. Edwards' employee, Edwin Rachleff, allegedly embezzled $12 million in funds from the credit union through numerous false account statements he filed between 1998 and 2008, the complaint said. NCUA found the credit union insolvent and placed it into involuntary liquidation in July 2008. Rachleff died the day the credit union was shut down. As a result of the liquidation, NCUA's National Credit Union Share Insurance Fund (NCUSIF) paid out about $9.7 million to members of the credit union on their insured shares, said the complaint. The agency is seeking reimbursement of more than $10 million--the $9.7 million NCUSIF payment, about $570,000 in uninsured shares that members of the credit union lost as a result of the liquidation, and administrative costs associated with the liquidation.

Russell Simmons Interchange amendment hurts underserved

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WASHINGTON (6/21/10)--More opposition to the interchange amendment in the Senate version of the regulatory reform legislation is being voiced by Russell Simmons, co-founder of hip-hop recording label Def Jam and advocate for the "poor, the voiceless and the underserved"--this time in a letter to the members of the financial reform conference committee. Simmons, writing in Huffington Post (June 18) to the committee, said he is "increasingly concerned that the central issue, the effect on the most vulnerable in our country is not fully appreciated by those making the decision." He has studied the amendment, spoken to members of Congress and "spoken to groups that have no hidden agenda: the community banks and credit unions--the good guys in the financial system," he wrote. The amendment, which would allow government intervention in setting interchange fees, is strongly opposed by the Credit Union National Association (CUNA) and the nation's credit unions. Last week hundreds of credit union representatives hiked Capitol Hill in Washington, D.C., while credit union grassroots supporters made about 600,000 contacts with congressional representatives to deliver the message: "No interchange amendment." Simmons' article pointed out what is at stake: "Debit cards are the entry point for millions of Americans into the American financial system. Debit cards are what keep the under-served--including minorities, immigrants, the poor, soldiers, veterans and students--from the claws of payday lenders and check cashers, from humiliated lines waiting to cash their paychecks and then more lines to pay their bills." Simmons owns a debit card company and maintains the amendment will have comparatively little and possible a positive effect on my particular business," but said "this is about ensuring that within our desire to create financial reforms, we do not do so at the expense of the poor." He noted his support of the "Move Your Money" campaign that supports community banks, credit unions and specialist providers of debit card services. Simmons has "received assurances" that new language in the amendment will come. "However, until I see action behind the words, I will continue to fight for the needs of poor people," he said. The article was the second this month Simmons had written for the Huffington Post in opposition to the interchange language. In the earlier article, he cited a joint letter that CUNA and the Independent Community Bankers of America wrote on the inadequacy of a carve out in the bill for smaller institutions as an influence on his decision to speak out against the amendment (News Now June 8).

Members United Corporate elects two new board members

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WARRENVILLE, Ill. (6/21/10)--Members United Corporate FCU announced the election June 14 of B. Don Crofut and the appointment of David Mooney to the Warrenville, Ill.-based corporate’s board of directors as of June 9. Crofut, president of South Metro FCU, Prior Lake, Minn., will serve a three-year term. Mooney, president/CEO of Alliant CU, Chicago, most recently served as chair of Members United’s supervisory committee. He was appointed to fill the seat of Ron Linstromberg of DeKalb Financial CU, Auburn, Ind., who announced his retirement. Also, board members re-elected to three-year terms are:
* John R. Caulfield, president/CEO, St. Mary’s CU, Marlborough, Mass.; * Andrew L. Jaeger, president/CEO, Credit Union of New Jersey, Ewing, N.J.; and * Michael Phipps, president/CEO, Evansville (Ind.) Teachers FCU.
New and returning board members include:
* Board Chair--John T. Fenton, president/CEO, Affinity FCU, Basking Ridge, N.J.; * Vice Chair--Kyle Markland, president/CEO, Affinity Plus FCU, St. Paul, Minn.; * Treasurer--Louis H. Jimenez, treasurer/CEO, Montauk CU, New York; * Secretary--Lloyd M. Fredendall, president/CEO, NorthStar CU, Warrenville, Ill.; * Terry R. Brahm, president/CEO, DHCU Community CU, Moline, Ill.: * Donald H. Briggs, president/CEO, NorthEast Alliance FCU, Bardonia, N.Y.; * Gary E. Furtado, president/CEO, Navigant CU, Smithfield, R.I.; and * Nancy Kasprzak-Whitmore, president/CEO, Niagara County’s FCU, Lockport, N.Y.

CU employee saves branch from fire

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FRONT ROYAL, Va. (6/21/10)--A quick-thinking credit union employee saved a Front Royal (Va.) CU branch from a fire that was triggered by faulty wiring connected to an exhaust fan in the bathroom. On Wednesday, around noon, a credit union employee entered the women’s restroom at the credit union and heard a small popping sound when she turned the lights on, said Kim Darr, Front Royal CEO. The exhaust fan caught fire, and the employee used a fire extinguisher to put out the flames. “By doing that, she saved the building,” Darr said. “We’re thankful for her quick response, which saved the credit union. We’re glad nobody was hurt.” The building was then evacuated, and the credit union called 911. Front Royal was closed for the remainder of the day. Members were served at Front Royal’s other branch, located a mile down the road. No members were in the credit union at the time of the fire. About eight employees were in the building, Darr said. The bathroom sustained some damage from the fire, but most of it has been cleaned up, Darr said. Ceiling tiles and linoleum need to be replaced because the fan fell on the floor when it caught fire. “We’re very lucky,” Darr said. “It could have been a lot worse.” Front Royal CU has $46 million in assets.

Sharkey named NEFE HSFPP director

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WASHINGTON (6/21/10)--Susan Sharkey has been named the new director of the National Endowment for Financial Education (NEFE) High School Financial Planning Program (HSFPP), a program popular with credit unions. Sharkey will join NEFE in early August. Sharkey was the curriculum designer who worked with dozens of NEFE’s national network subject matter specialists in 2005 and 2006 to create the current version of the NEFE program. She spent nine years as an instructional design consultant and manager of consulting projects for the Worldwide Instructional Design System (WIDS) in Wisconsin. She began working at WIDS after 14 years as a high school educator. “Susan brings her strong background to NEFE and the HSFPP at a particularly critical time,” said John Parfrey, NEFE HSFPP director. “The need for quality financial education programs is great. And where some programs might have all the right ingredients in place, a true educational program is a well-prepared, exquisitely presented feast of learning, and that is what Susan brings to her role as director of the NEFE High School Planning Program.”

NCUA reaffirms CDCI support at Serving the Underserved

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NEW YORK (6/21/10)--The community development credit union (CDCU) movement’s two top concerns were given strong support from National Credit Union Association (NCUA) Chairman Debbie Matz in her remarks at the 36th Annual Conference on Serving the Underserved in Pittsburgh earlier this month, said the National Federation of Community Development Credit Unions.
Debbie Matz, board chair of the National Credit Union Administration, gave a keynote address at the National Federation of Community Development Credit Unions’ 36th Annual Conference on Serving the Underserved earlier this month in New York.
The Community Development Capital Initiative (CDCI), the Treasury Department's program to invest in financially sound CDCUs that are certified by the Community Development Financial Institutions (CDFI) Fund, has received 111 applications, Matz said. Announced in February by Treasury Secretary Timothy Geithner, the capital initiative will make secondary capital investments of up to 3.5% of assets in eligible low-income credit unions. Applicants are being reviewed for financial soundness by NCUA. Matz assured conference attendees that “no credit union’s application for CDCI will be denied by NCUA staff without [my] concurrence.” Matz restated her commitment to personally review all CDCI applications before final decisions are made. Federation Governmental Affairs Committee Chairman Deyanira Del Río, board president of the Lower East Side Peoples FCU, the largest CDCU in New York City, said, “We feel confident that Ms. Matz’s commitment to this program will allow as many credit unions as possible to make their case and fulfill the president's intent to strengthen community-based financial institutions serving the nation's hardest-hit communities.” Federation President/CEO Cliff Rosenthal praised NCUA for its flexibility and responsiveness. NCUA worked “closely with the federation under tight deadlines to address critical issues in the CDCI program,” he said. “Her assistance has been crucial. By Sept. 30, we are hoping that as many as 100 credit unions will receive a total of more than $100 million in secondary capital.”
Gigi Hyland, National Credit Union Administration board member, addressed attendees of the sixth Latino Credit Union Conference. (Photos provided by the National Federation of Community Development Credit Unions)
Matz and NCUA board member Gigi Hyland, who opened the Sixth Latino Credit Union Conference two days earlier, touched on NCUA supervisory letter: Supervising Low-Income Credit Unions and Community Development Credit Unions (10-CU-01), which drew upon dialogue among NCUA, CDCUs and federation leadership. The letter “emphasizes that CDCUs and low-income credit unions have unique characteristics and challenges that are very different from those of most larger credit unions,” Matz explained. It “reminds examiners that they should take that fact into account when evaluating loan portfolios, funding sources and operating costs.” Examiners’ primary responsibility is promoting viable and sustainable credit union service to their members. “The letter does not mean that we are easing regulatory scrutiny or providing any special exclusion to the rules,” Matz said. “Every credit union must live up to all the fundamental criteria that ensure the safety and soundness of operations.” “We welcome the priority NCUA’s leadership has given to this, and the training and instruction they have given to examiners,” Rosenthal said. “However, we continue to see a gap between board-level policy and the interactions between examiners and CDCUs.” The federation plans to survey its membership to determine the impact of the letter, and will share its findings with NCUA’s board, he added. More than 300 representatives of credit unions, government, and asset-building professionals attended the federation's event, which began on June 9 with the Sixth Latino Credit Union Conference, co-sponsored by the federation and the Network of Latino Credit Unions and Professionals. A large delegation from Mexico attended, as did a representative of a Senegal credit union. Senior officials of the Small Business Administration and the U.S. Department of Agriculture (USDA) were among the featured speakers. An outcome from an address by USDA Deputy Administrator for Cooperative Programs LeAnn Oliver was the federation’s formation of a rural credit union task force, to be chaired by Marcus Bordelon, CEO of Appalachian FCU, Berea, Ky. He also was honored with the federation's 2010 Annie Vamper “Helping Hands” Award--the highest honor given by the federation.

Bergeron Maheux elected to Tricorp FCU board

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PORTLAND, Maine and BURLINGTON, VT. (6/21/10)--Tricorp FCU held its 35th annual meeting in Portland, Maine, last week with 36 member credit unions attending. The corporate elected two board members and its officers, and discussed the corporate's financial status.
Elected to the Tricorp FCU board by acclamation were, from left, Joe Bergeron, president of the Association of Vermont Credit Unions, and Roland Maheux, chief financial officer, Maine State CU, Augusta, Maine. (Photo provided by the Association of Vermont Credit Unions)
New board members elected by acclamation are Association of Vermont Credit Unions (AVCU) President Joe Bergeron and Roland Maheux, chief financial officer of Maine State CU, Augusta, Maine, said AVCU's newsletter, Newslines Express (June 18). Officers elected in the organizational meeting were:
* Chair, Don Casko, Katahdin FCU, Millinocket, Maine; * Vice Chair, Ralph Ferland, Eastern Maine Medical Center FCU, Bangor, Maine; * Secretary, Paul Roy, Bellwether Community CU, Manchester, N.H.; and * Principal Financial Officer, Maheux.
Other directors are Joe Gervais, University CU, Orono, Maine, and Vicki Stuart, Central Maine FCU, Lewiston, Maine. TriCorp CEO Steve Roy reported the financial status of Tricorp as relatively favorable in a sea of uncertainty about new regulation and challenges in the corporate sector. He said Tricorp is working hard to ensure it s long-term viability as a local service provider to its member credit unions.

MnCUN CEOs column Interchange proposal a lose-lose

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ST. PAUL, Minn. (6/21/10)--Mark D. Cummins, president/CEO of the Minnesota Credit Union Network (MnCUN), discussed interchange fee legislation in his monthly column in Finance & Commerce newspaper. In, “Interchange fee proposal a ‘lose-lose,’” Cummins discussed the “toxic” interchange amendment inserted into the Senate’s version of the financial regulatory reform bill. He noted the amendment has financial institutions “gravely concerned over its unintended consequences.” The Senate bill’s interchange language would allow the government to control interchange fees. The Credit Union National Association opposes the amendment, and hundreds of credit union representatives nationwide went to Washington last week to voice their opposition to the interchange changes. More than half a million credit union backers have done the same through phone calls or electronic messages to their elected representatives. “We fully support Congress’ attempts to protect consumers with its financial reform, but including this interchange provision in the final financial regulatory reform bill would actually hurt consumers in the long run,” Cummins said in the article. He referred to a bipartisan congressional letter circulating on Capitol Hill that agrees with credit unions’ viewpoint--that the interchange provision “will devastate credit unions and community banks and harm every consumer that uses debit and credit cards to pay for everyday essentials and large purchases alike … while providing no discernable benefits for consumers.” The letter, delivered Wednesday to conferees tasked with reconciling the House and Senate versions of the bill, was signed by 131 members of Congress. Cummins also cited a report on interchange published by the Government Accountability Office in 2009 that says limiting or decreasing interchange fees could shift the cost from merchants to card holders. “Simply stated? The interchange amendment will hurt consumers by raising the price of basic banking products,” Cummins wrote. MnCUN’s next column is slated to run July 16. For more information, use the link.

CU System brief (06/18/2010)

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* ONTARIO, Calif. (6/21/10)--SchoolsFirst FCU CEO Rudy Hanley and
Click to view larger image Click for larger view
retired Unocal FCU CEO Judy Hurst received the “Unsung Heroes” award from the California Credit Union League. The award honors individuals in the credit union industry with 20 years of service and who have made significant contributions in the community. Hanley worked for the California league and the Credit Union National Association prior to joining SchoolsFirst (formerly Orange County Teachers FCU). Hurst joined the California league in 1982 as a consultant and is a graduate of Western CUNA Management School. SchoolsFirst FCU, Santa Ana, Calif., has $8 billion in assets. Unocal FCU is now Wescom CU, Pasadena, Calif. Hanley is pictured with Mary Cunningham, CEO of USA FCU, San Diego, and a member of the league Historical Preservation Committee. (Photo provided by the California Credit Union League) ...

Nebraska league board awards named

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OMAHA, Neb. (6/21/10)--The Nebraska Credit Union League and Nebraska Credit Union League Services Corp. boards named new officers during a reorganization meeting after the league’s 76th annual meeting convention. League board of directors include:
* Chairman--Tom Kjar, president/CEO, Creighton FCU, Omaha; * First Vice Chair--Ken Bradshaw, president/CEO, Liberty First CU, Lincoln; * Second Vice Chair--Mary Johnson, president/CEO, Omaha (Neb.) Police FCU; * Secretary/Treasurer--Scott Sullivan, president/CEO, Nebraska Credit Union League.
League Services Corp. board of directors officers include:
* Chairman--Bradshaw; * Vice Chair--Johnson; and * Secretary/Treasurer, Ronny Miller, president/CEO, Gallup FCU, Omaha.
Each officer will serve until the 77th annual meeting next June in Omaha. Also at the meeting, Jerry Barnett, president/CEO of Lincoln (Neb.) Goodyear Employees FCU--now LincOne FCU--received the 2010 Credit Union Professional Distinguished Service Award. Barnett began his career in 1977 at Burlington Northern CU as a teller, and joined Lincoln Goodyear in 1983 as a loan officer. In 1990, he was named CEO. According to Barnett’s nomination letter, every issue that comes before him is addressed from the perspective of how it will affect members. He has stated that there is no better feeling than helping members realize a dream or help them work their way out of a difficult financial situation. He believes that members are like family.