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CU difference shows in overdraft programs CUNA to CFPB

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WASHINGTON (7/2/12)--Because of their cooperative structure, credit unions  do not have financial incentives to charge members the high fees that banks frequently do in order to maximize profits for shareholders--the Consumer Financial Protection Bureau (CFPB) should note this difference as it proceeds to write regulations governing overdraft protection programs, according to the Credit Union National Association (CUNA).

In a comment letter submitted to the CFPB Friday, CUNA's Deputy General Counsel Mary Dunn said that a recent study by the Pew Charitable Trusts, which compared the fee practices of the 12 largest credit unions with those of the 12 largest banks, bears out the difference in fee practices. Credit union fees are reasonable and CUNA has urged the agency not to regulate in this area. Dunn cited an April statement from CFPB Director Richard Cordray in which he said the agency does not intend to regulate fees.   

The Pew study found in 2011 the median fee charged by credit unions when the credit union covered the item was less than three-quarters of that charged by banks. The median fee charged by credit unions when transferring funds from an account of the member to cover the overdraft was $5, compared to $12 charged by banks, according to the study. 

The comment letter noted that CUNA and credit unions are strong proponents of fair lending practices and proper consumer disclosures.  In 2004, CUNA developed its policy on overdraft protection programs, which states that "when used appropriately by members, [overdraft protection programs] serve as a valuable alternative to overdrawing share drafts and are fully consistent with the philosophy and principles unique to the credit union system."   (Use the resource link to read the complete policy at the end of the comment letter text.)

CUNA asked the agency to be mindful that credit unions offer overdraft programs as a convenience and accommodation for their members and have indicated many members appreciate these services.  

Prior to developing its letter to the CFPB on overdraft protection programs, CUNA conducted a survey and over 500 members provided their responses. The survey made a distinction between Overdraft Protection/Transfer programs and Overdraft Privilege programs, even though the agency did not clearly define these terms. 

"Reflecting our members' practices, we defined an 'Overdraft Protection/Transfer' program as one in which funds are transferred to the member's checking account from the member's savings, money market, or other type of account to cover the amount of an item that would have otherwise been unpaid.  We define an 'Overdraft Privilege' program as one in which the credit union's own funds are used to cover the overdraft."

CUNA found that among credit unions that offer a type of Overdraft Protection/Transfer program, over 80% of respondents indicated that at least half of their members with checking accounts have signed up for one or more of these programs, indicating the importance of these services to those members. 

Almost all respondents inform their members of these programs through information included with the disclosures provided at account-opening, as well as by having staff inform members at account-opening.

In addition, roughly two-thirds of respondents have staff inform members of these programs upon being contacted by the member regarding an overdraft that has occurred.  These credit unions view this as a critical opportunity for the credit union to inform the member of a lower cost alternative to other forms of overdraft protection.

Use the resource link to read CUNA's full comments.

CUNA touts MBLs at congressional credit briefing

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WASHINGTON (7/2/12)--The Congressional Caucus on Access to Capital & Credit convened a briefing Friday that brought together representatives from both government and private lending--including the Credit Union National Association (CUNA) to represent credit unions--to discuss ideas of how to expand capital access to help boost the economy.

CUNA Chief Economist Bill Hampel tells attendees at a congressional briefing on credit access that credit unions need a higher member business lending cap if they are to continue to help small businesses during the economic recovery. (CUNA Photo)


Bill Hampel, CUNA's chief economist, used the forum to highlight a need for an increased cap on credit union member business lending (MBL) to help small businesses with an ongoing credit crunch.   

CUNA estimates that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

CUNA also has reported that in the four years since the recession began, credit union business loans outstanding rose by 45%, while small business loans at banks fell by 13.4% over the same period.

Hampel told the caucus audience that unless the MBL cap is increased, more than 500 credit unions may have to stop or slow their small business lending programs within the next few years.

"The point is," Hampel said, "these 500 credit unions--that incidentally hold about 75% of MBLs subject to the cap--are right now having to stop or slow their business lending solely because of this arbitrary cap.

"That is just plain wrong, particularly at a time when small businesses are crying out for more credit."

He noted there are bills in the U.S. House (H.R. 1418) and Senate (S. 2231) that would increase the cap to 27.5% of assets and noted it was a "no-brainer" way to increase capital for small businesses.

The capital and credit access caucus is co-chaired by Reps. David Schweikert (R-Ariz.) and Bobby L. Rush (D-Ill.). Also on the Friday program were representatives from: The U.S. Treasury Department's Community Development Financial Institutions Fund, the Security and Exchange Commission, the Small Business Administration, the American Bankers Association, the Independent Banks Association, CrowdCheck, the National Venture Capital Association, and Opportunity Finance Network.

NCUA used caution in audited statements CUNA

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WASHINGTON (7/2/12)--The most important implication for credit unions of the new Temporary Corporate Credit Union Stabilization Fund (TCCUSF) financial statements combined with the updated information posted Friday by the National Credit Union Administration on its website on Corporate System Resolution Costs is what it says about the likely remaining assessments for that fund, said Credit Union National Association (CUNA) Chief Economist Bill Hampel in a recent analysis.

The National Credit Union Administration (NCUA) received a clean audit of its corporate stabilization fund last week (News Now June 25). And, as promised when announcing the clean audit, the NCUA Friday posted an update to its the corporate system resolution loss projections through year-end 2011.

Hampel said that after analyzing both sets of information, he believes that the NCUA used "an abundance of caution" in developing the audited financial statements, which offered a negative net position of $5.3 billion as of December 2011 as the latest estimate of the amount to be paid in future stabilization assessments.  

In reviewing all the information, Hampel said, the negative net position is 80% of the way to the top of the projected loss range predicted at $2.7 billion to $6 billion. 

He said that because the negative net position is at the high end of the range, it appears to be a "very-unlikely-to-be-exceeded" number rather than a "most-likely-to-be assessed" number. 

"Assuming that the various outcomes are distributed fairly evenly around the $4.4 billion mid-point of the range, this suggests that the remaining assessments to credit unions will total about $4.4 billion rather than $5.3 billion.

"That would reduce by one the number of years remaining of roughly 10 basis point assessments to four to five," Hampel said.

Hampel reminded that the loss estimates are just that--educated predictions.

"The fact that the U.S. housing market has been improving over the past few months suggests the ultimate losses could be lower."

The NCUA has told CUNA that this year's assessment will be on the agenda for its board meeting on July 24.

Inside Washington (06/29/2012)

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  • CHICAGO (7/2/12)--The Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board Friday outlined the process for receiving and evaluating initial resolution plans--known as living wills--from big banks. Companies subject to the rule are required to file their initial resolution plans in three groups on a staggered schedule. Firms in the first group, which includes U.S. bank holding companies with $250 billion or more in total nonbank assets and foreign-based bank holding companies with $250 billion or more in total U.S. nonbank assets, must submit their initial resolution plans by today. The group includes Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. The Dodd-Frank Act requires that bank holding companies with assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Federal Reserve submit resolution plans annually to the FDIC and the Federal Reserve. Each plan must describe the company's strategy for rapid and orderly resolution under the Bankruptcy Code in the event of the company's material financial distress or failure. By regulation, the plans must be divided into a public section and a confidential section. The public section of the plans will contain detailed information to allow the public to understand the business of the covered company. The FDIC and the Fed said they will release the public section of the resolution plans on Tuesday, with preliminary reviews of the plans to be completed within 60 days …

Five-year NFIP extension okayed by House Senate

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WASHINGTON (7/2/12)--A long-term extension of the National Flood Insurance Program (NFIP) awaits the signature of the president and with that stroke of a pen the program receives an extension through 2017. The Credit Union National Association (CUNA) has strongly supported the extension.

On Friday the U.S. House passed the five-year extension of the flood insurance program by a vote of 373-52, and the Senate quickly followed suit and approved its version of the legislation, 74-19.

The next stop is the White House, where the president is expected to sign the extension into law well before the program's current July 31 expiration date.

CUNA President/CEO Bill Cheney said this action of Congress "provides credit unions with certainty for the future of the National Flood Insurance Program for the foreseeable future. CUNA and credit unions have been encouraging Congress to approve a multi-year authorization for several years for this important program. This comes in the wake of the NFIP being subject to almost a dozen short-term extensions since the last time it enjoyed a long-term extension.

"There have even been some instances of Congress allowing flood insurance to lapse, which had complicated the mortgage lending process. Congress' action will ensure that credit unions--and the consumers that they serve--can have a much greater degree of confidence in the lending process and the prospect of financing their homes."

Earlier last week, CUNA urged Senate lawmakers to include language addressing force-placed flood insurance in its final version of NFIP legislation. Forced-place insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer.

The House bill includes language that would allow lenders to charge borrowers for costs of premiums and fees incurred by the lender after borrowers required to have flood insurance either cancel or let the required policy lapse--and then fail to purchase flood insurance within 45 days after notification of that lapse.

The final version of the Senate NFIP adopted the CUNA-sought provision.

The flood insurance program was established in 1968 and is administered by the Federal Emergency Management Agency (FEMA). Prior to its existence, many homeowners, renters and businesses were unable to insure against flood losses because private insurers did not offer such coverage or because it was unaffordable.

Flood insurance is required by law in flood zone areas that are designated by recently updated FEMA maps. It is a necessary purchase by prospective homeowners before credit unions or other lenders can offer mortgages and other related products to homebuyers.

CUNA has worked diligently to convince Congress to extend the NFIP program because previous lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

Pre-break CUNA ads highlight MBL support

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Click download CUNA ad touts the U.S. Conference of Mayors' support of MBL cap increase.
WASHINGTON (7/2/12)--In advance of the U.S. House and Senate breaking this week for a July 4 District Work Session, the Credit Union National Association (CUNA) ran two ads in Politico, both of which underscored the broad coalition of support that exists for an increased cap on credit union member business lending.

One of the CUNA ads touted the recent addition of the U.S. Conference of Mayors as a vocal supporter of legislation to raise the cap. Last month, the mayors' conference adopted a resolution supporting S. 2231, the Senate version of legislation that would raise the cap to 27.5% of assets, up from the current 12.25% limit. The House has pending legislation that would do the same.

CUNA has estimated that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

Under the banner head "MORE JOBS," the ad says, "When Mayors from across the country agree on something, you know it's important..."  It notes the 187 members of the Conference of Mayors urges Congress to pass the MBL legislation to help small business members.

Click download CUNA ad highlights a long and varied lists of MBL supporter.
The second CUNA ad, featured just pages away from the first, highlights the large and growing number--and range--of organizations that back increased MBLs as a way to boost the economy at no cost to taxpayers.

That support encompasses small businesses, conservative think tanks as well as progressive community and minority advocacy organizations,  and groups like the National Association of Homebuilders, the National Association of Mortgage Brokers, the National Association of Professional Insurance Agents, and the National Association of Realtors.

CUNA urges credit unions and small business advocates to meet with House and Senate lawmakers in their home offices during the district work period to continue to encourage passage of the MBL bills.

Click on the ads displayed in this article to see a larger version.

CUNA touts MBLs at congressional credit access briefing

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WASHINGTON (7/2/12)--The Congressional Caucus on Access to Capital & Credit convened a briefing Friday that brought together representatives  from both government and private lending--including the Credit Union National Association (CUNA)  to represent credit unions--to discuss ideas of how to expand capital access to help boost the economy.

Bill Hampel, CUNA's chief economist, used the forum to highlight a need for an increased cap on credit union member business lending (MBL) to help small businesses with an ongoing credit crunch.  

CUNA estimates that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

CUNA also has reported that in the four years since the recession began, credit union business loans outstanding rose by 45%, while small business loans at banks fell by 13.4% over the same period.

Hampel told the caucus audience that unless the MBL cap is increased, more than 500 credit unions may have to stop or slow their small business lending programs within the next few years.

"The point is," Hampel said, "these 500 credit unions--that incidentally hold about 75% of MBLS subject to the cap--are right now having to stop or slow their business lending solely because of this arbitrary cap.

"That is just plain wrong, particularly at a time when small businesses are crying out for more credit."

He noted there are bills in the U.S. House (H.R. 1418) and Senate (S. 2231) that would increase the cap to 27.5% of assets and noted it was a "no-brainer" way to increase capital for small businesses.

The capital and credit access caucus is co-chaired by Reps. David Schweikert (R-Ariz.) and Bobby L. Rush (D-Ill.). Also on the Friday program were representatives from: The U.S. Treasury Department's Community Development Financial Institutions Fund, the Security and Exchange Commission, the Small Business Administration, the American Bankers Association, the Independent Community Bankers Association, CrowdCheck, the National Venture Capital Association, and Opportunity Finance Network.

NEW Five-year NFIP program just awaits presidents signature

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WASHINGTON (UPDATE 6/29/12, 2:27 p.m. ET)--A long-term extension of the National Flood Insurance Program (NFIP) awaits the signature of the president and with that stroke of a pen the program receives an extension through 2017. The Credit Union National Association (CUNA) has strongly supported the extension.

Earlier today the U.S. House passed the five-year extension of the flood insurance program by a vote of 373-52, and the Senate quickly followed suit and approved its version of the legislation 74-19.

So next stop is the White House, where the president is expected to sign the extension into law well before the program's current July 31 expiration date.

CUNA President/CEO Bill Cheney said, "Today's action by the Congress provides credit unions with certainty for the future of the National Flood Insurance Program for the foreseeable future. CUNA and credit unions have been encouraging Congress to approve a multi-year authorization for several years for this important program. This comes in the wake of the NFIP being subject to almost a dozen short-term extensions since the last time it enjoyed a long-term extension.

"There have even been some instances of Congress allowing flood insurance to lapse, which had complicated the mortgage lending process. Congress' action will ensure that credit unions--and the consumers that they serve--can have a much greater degree of confidence in the lending process and the prospect of financing their homes."

Earlier this week, CUNA urged Senate lawmakers to include language addressing force-placed flood insurance in its final version of NFIP legislation.

Forced-place insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer.

The House bill includes language that would allow lenders to charge borrowers for costs of premiums and fees incurred by the lender after borrowers required to have flood insurance either cancel or let the required policy lapse--and then fail to purchase flood insurance within 45 days after notification of that lapse.

The final version of the Senate NFIP adopted the CUNA-sought provision.

The flood insurance program was established in 1968 and is administered by the Federal Emergency Management Agency (FEMA). Prior to its existence, many homeowners, renters, and businesses were unable to insure against flood losses because private insurers did not offer such coverage or because it was unaffordable.

Flood insurance is required by law in flood zone areas that are designated by recently updated FEMA maps. It is a necessary purchase by prospective homeowners before credit unions or other lenders can offer mortgages and other related products to homebuyers.

CUNA has worked diligently to convince Congress to extend the NFIP program because previous lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

CFPB codifies info-protections for FIs

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WASHINGTON (6/29/12)--Protections for private information that financial institutions and others submit to the Consumer Financial Protection Bureau (CFPB) are codified under a new CFPB final rule.

The rule seeks to ensure that groups or individuals that supply information to the CFPB do not waive their right to privacy protections, and clarifies that these protections would remain intact when privileged information is transferred from the CFPB to other federal or state agencies.

CFPB Director Richard Cordray said the rule "supports the free flow of information that is essential to an effective supervision program." Cordray said his agency is "committed to safeguarding the confidential information of the institutions we supervise to ensure the Bureau is best equipped to do its job and protect consumers."

For the CFPB release, use the resource link.

CUs get guidance on military mortgage work

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ALEXANDRIA, Va. (6/29/12)--The National Credit Union Administration (NCUA) in a letter to credit unions outlined the steps that credit unions should take when mortgage-holding servicemembers are given Permanent Change of Station (PCS) orders.

The NCUA letter (12-CU-07) referenced a recently released document: Interagency Guidance on Mortgage Servicing Practices Concerning Military Homeowners with Permanent Change of Station Orders. Any credit union responsible for managing a military member's mortgage loan account, including collecting and crediting monthly payments, acts as a mortgage servicer and needs to follow the new guidance, the NCUA said.

Servicemembers that have received PCS orders remain accountable for their financial obligations, including their mortgages, when they move, and may need to continue paying their mortgage if their home goes unsold, the NCUA noted.

The NCUA letter suggested that credit unions and other financial institutions give homeowners facing relocation clear, easily understandable information outlining various homeowner assistance options. Financial institutions should also advise homeowners on how they can track the status of any ongoing assistance efforts, and should provide their own assistance status updates.

Those updates can include a detailed explanation of why a request for homeowner assistance may have been denied, and how borrowers can avoid being denied assistance in the future, the agency said.

Credit unions should not advise or ask homeowners to waive their rights under the Servicemembers Civil Relief Act or other laws as a prerequisite to providing information about other available options or evaluating eligibility for assistance, the NCUA said. Credit unions also should not advise homeowners that have had no previous issues paying their loans to stop making payments in a bid to qualify for assistance, the agency added.

The NCUA said credit union officials should discuss the guidance with agency examiners as they develop or enhance their mortgage lending programs.

Supervisory and/or enforcement actions could be taken against mortgage servicers that engage in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate federal consumer financial laws and regulations, the guidance warned.

"Every military homeowner with PCS orders deserves appropriate assistance and accurate advice during this period of heightened financial vulnerability," NCUA Chairman Debbie Matz said, noting that "credit unions have an excellent track record providing mortgage financing and servicing to our military personnel."

For the letter to credit unions, use the resource link.

RESPA issues hang as Supreme Court declines to rule

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WASHINGTON (6/29/12)--The U.S. Supreme Court on Thursday refused to rule on a case that asked whether statutory standing was sufficient to sue under the Real Estate Settlement Procedure Act (RESPA).

The case, First American Financial Corp. v. Edwards, centered on whether a consumer, who based a purchase of title insurance on a referral by a real estate settlement agency--under conditions the consumer claims violated RESPA's anti-kickback provisions--can sue in federal court if there is no evidence of actual injury.

Denise P. Edwards claimed First American Financial did not inform her of an exclusive business arrangement with its title insurance agent, First American Title Insurance, when it made the referral.

First American Financial argued that Edwards did not suffer a concrete injury and that she did not allege that the charge for title insurance was higher than it would have been without the exclusivity agreement. First American Financial also noted that Edwards cannot make that allegation, and she therefore suffered no harm as a result of the exclusive business arrangement, because Ohio law mandates that all title insurers charge the same price.

The case made its way up to the ninth circuit appellate court, which concluded that Edwards had the right to sue under RESPA, regardless of whether she was overcharged for services or not.

First American Financial last year filed a writ of certiorari asking the higher court to review the case, which was accepted by the Supreme Court, and oral arguments were heard. But the Supreme Court yesterday said the writ was "improvidently granted." There is no clear reason why the Supreme Court decided not to issue an opinion in the case.

"While it was hoped that the Supreme Court's opinion in First American Financial could help minimize or prevent unjustified lawsuits, such as those involving outside ATM notices where no actual damages have been alleged, the Court's approach today is not likely to have much bearing on that issue," Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said.

A legislative fix for ATM litigation issues that have caused significant issues for many credit unions and other financial institutions is making its way through the U.S. Congress, however, and that bill could see a vote in the full House after the upcoming July 4 district work period.

Use the resource link below to read a June 28 News Now story, "ATM bill vote a step forward for CUs: CUNA."

CFPB could add reverse mortgage scrutiny to to-do list

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WASHINGTON (6/29/12)--Reverse mortgages are the latest financial product to see Consumer Financial Protection Bureau (CFPB) scrutiny, and the agency may create new regulations addressing those products, the Credit Union National Association (CUNA) said.

The CFPB on Thursday asked for public comment on reverse mortgages, which allow homeowners over age 62 to cash out a portion of their home equity. While these products are not widely available at credit unions, CUNA will soon ask credit unions if they have comments or concerns that should be passed on to the CFPB.

Specifically, the agency requested comments from consumers and other financial industry participants on which factors influence reverse mortgage consumers' decisionmaking, and how reverse mortgage loan proceeds are used by consumers. The CFPB also asked for information on how the decision to enter a reverse mortgage transaction can impact consumers' long-term finances, and any differences in market dynamics and business practices among the broker, correspondent, and retail channels for reverse mortgages.

CUNA Senior Assistant General Counsel Jared Ihrig said the agency has the authority to regulate reverse mortgages, and the agency expects to undertake a project to integrate reverse mortgage Truth in Lending (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosure requirements. This project would be separate from the agency's current TILA/RESPA integration project, which addresses the forms that are provided before a home is purchased.

As mandated by the Dodd-Frank Act, the agency this week submitted a 231-page report to the U.S. Congress on reverse mortgage products. In the report, the CFPB called reverse mortgages "inherently complicated products that are not easy for the average consumer to understand."

The rising-balance, falling-equity nature of reverse mortgages and the increased complexity of some reverse mortgage loan products are among the factors that create issues for consumers, the CFPB added. Further, federal disclosures and other tools provided to consumers "are insufficient to ensure that consumers are making good tradeoffs and decisions" when they take out reverse mortgages on their homes, the CFPB said.

Although fewer than 3% of eligible homeowners have reverse mortgages on their homes, and 70,000 new reverse mortgages are originated each year, according to CFPB numbers. However, the increasing age of many Americans could lead to an increase in the number of reverse mortgages in the marketplace, the agency reported.

The CFPB noted that borrowers are taking out reverse mortgage loans at younger ages, and taking out funds from their reverse mortgages sooner, two changes that increase some of the financial risks associated with reverse mortgage products. Some homeowners are also taking out reverse mortgages on their homes as a way to refinance traditional mortgages, and borrowers that take this step "may simply be prolonging an unsustainable financial situation," the CFPB added. Nearly 10% of reverse mortgage borrowers were at risk for foreclosure, according to the CFPB.

For the CFPB report, use the resource link.

Inside Washington (06/28/2012)

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  • WASHINGTON (6/29/12)--Federal Home Loan Banks (FLHB) increased credit exposure to European financial institutions substantially in 2010 and 2011, even as the risks associated with doing so increased, according to a study released Wednesday by the Federal Housing Finance Agency's (FHFA) Office of the Inspector General (OIG). For example, FHFA-OIG found that in 2011 one FHLB extended more than $1 billion in unsecured credit to a European bank although the foreign bank's credit rating was downgraded and later suffered a multibillion dollar loss. Although FHFA identified extensions of unsecured credit by the FHLBs as an increasing risk in early 2010, the agency did not prioritize it in its examination process due to its focus on greater financial risks then facing the FHLB system, the report said. In 2011, FHFA initiated oversight measures that focus on credit extensions, such as prioritizing them in the supervisory process and increasing the frequency with which the FHLBs report on their unsecured credit portfolios …
  • WASHINGTON (6/29/12)--Federal Reserve bank board directors should step down when it appears they have a conflict of interest, Federal Deposit Insurance Corp. (FDIC) board member Thomas Hoenig said in a Bloomberg Radio interview, according to American Banker (June 28). Directors should give up their seat "for the perception of the integrity of the institution," Hoenig said in an interview Tuesday on the program "The Hays Advantage" with Kathleen Hays and Vonnie Quinn. Hoenig was sworn in for a six-year term as a member of the FDIC board in April. Prior to that, Hoenig was the president of the Federal Reserve Bank of Kansas City and a member of the Federal Reserve System's Federal Open Market Committee from 1991 to 2011. Hoenig was with the Federal Reserve for 38 years, beginning as an economist and then as a senior officer in banking supervision during the U.S. banking crisis of the 1980s …
  • WASHINGTON (6/29/12)--The Treasury Thursday launched the MyMoneyAppUp Challenge to help generate new ideas for personal finance mobile applications. The challenge features two components. The IdeaBank is a call for ideas, in 140 characters or less, for app-based solutions from the general public. Visitors to the site can vote on their favorite submissions. A panel of judges will select the final winners from the top 10 that receive the most votes from the public. Winners are eligible to receive cash prizes ranging from $250 to $1,000. The App Design Challenge is a call for comprehensive design proposals for mobile apps from companies, individuals and teams of individuals. Contestants must complete an online submission form detailing their design and how it will improve financial capability and/or access. Contestants are encouraged, but not required, to use ideas from the IdeaBank as inspiration for their proposals. Judges will review and score the proposals with the winners announced at an awards event and eligible for cash prizes ranging from $2,500 to $10,000 …
  • ALEXANDRIA, Va. (6/29/12)--The National Credit Union Administration has pushed back the time of its Monday, July 23 closed meeting to 2:30 p.m. (ET).  Originally, the closed session was slated for Tuesday, July 24 at 2 p.m. (ET) …

CUNA analysis TCCUSF financials show unchanged loss estimates

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WASHINGTON (6/29/12)--The most important implication for credit unions of the new Temporary Corporate Credit Union Stabilization Fund (TCCUSF) financial statements is what they say about the likely remaining assessments for that fund, said Credit Union National Association (CUNA) Chief Economist Bill Hampel in an analysis of the fund's audited statements.

The National Credit Union Administration (NCUA) received a clean audit of its corporate stabilization fund last week (News Now June 25). Although it came four months after the release of financial statements for the other major funds managed by the NCUA, the TCCUSF statements came about six months earlier than last year.

When announcing the clean audit, NCUA Chairman Debbie Matz said agency staff is working to update the corporate system resolution loss projections through year-end 2011, and will post the information on the NCUA's Corporate System resolution Costs webpage by the end of June.

Hampel said that, pending the update, it can be inferred from the financial statements that as of last December the NCUA's estimates of the ultimate costs of the corporate stabilization are essentially unchanged from what they were at the end of 2010. A negative net position of $5.3 billion as of December 2011 represents the latest estimate of the amount to be paid in future stabilization assessments.

"It is encouraging that the loss estimates have not increased over the full year 2011.  However, the fact that they did not fall as previously suggested is disappointing," said Hampel. 

The CUNA analysis suggests that the loss estimate declined about $1.5 billion from December 2010 to August 2011, but then rose by a similar amount by the end of the year, to end the full year unchanged.

Hampel reminded that the loss estimates are just that-- educated predictions.

"The fact that the U.S. housing market has been improving over the past few months suggests the ultimate losses could be lower.  Nevertheless, based on this latest loss estimate, it would require annual assessments of approximately 10 basis points for the next five to six years to pay off the total resolution costs."

The NCUA has told CUNA that this year's assessment will be on the agenda for its board meeting on July 24.

Bank thrift mortgage delinquencies a three-year low

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WASHINGTON (6/28/12)--Mortgage portfolios at national banks and federal savings and loans are performing much better, according to a report released Wednesday by the Office of the Comptroller of the Currency, and delinquencies associated with first lien loans is at its lowest level in three years.

The OCC Mortgage Metrics Report for the First Quarter of 2012 also shows that percentages of mortgages that were 30 to 59 and 60 to 89 days delinquent also decreased to their lowest levels since the OCC began publishing its report on mortgage performance in first quarter of 2008.

The OCC attributed the improved performance to such factors as strengthening economic conditions during the quarter, seasonal effects, servicing transfers, and the "ongoing effects of home retention programs as well as home forfeiture actions."

The OCC said the large number of delinquent loans continues to work through the loss mitigation process, and the number of new foreclosures initiated during the quarter decreased to 286,951—down 1.8% from the previous quarter. The inventory of foreclosures in process increased from the previous quarter to 1,269,921, but is down from 1,308,757 a year ago, the report shows.

Use the resource link below to access the OCC report and to see the Credit Union National Association's most recent Credit Union Monthly Estimates.

Sen. Brown CU tax status as justified as ever

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WASHINGTON (6/28/12)—Sen. Sherrod Brown, in a letter to U.S. Treasury Secretary Timothy Geithner, said the federal credit union tax status continues to be as valid today as it was when it was first established by the U.S. Congress.

The Ohio Democrat's June 26 letter reminded that credit unions were initially exempted from federal taxation under the Federal Credit Union Act, because:

*They are cooperatives operated for and by their members; and

*Credit union shares are essentially members' deposits.

Brown added that Congress reaffirmed its tax decision regarding federal credit unions in 1998 and noted that it was because credit unions are "member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means."

Brown told Geithner that these justifications are as true today as they were when Congress passed the law.

Credit unions, Brown wrote:

  • Have deep roots in their communities;
  • Are tight-knit organizations whose members are united by a common bond;
  • Are made up of co-workers, colleagues, and neighbors who joingt together to become co-owners of 'true community institutions";
  • Provide loans so small businesses can hire workers and export products to new markets; and
  • Help make college more affordable for students, as well as provide financial education to help families plan their finances and save for the future.
Brown's endorsement of the credit union tax status comes at a time when the government is considering revisions to the country's tax code as Bush-era tax rates are set to expire on Jan. 1, 2013.

The tax-exempt status of credit unions has not been mentioned in any of the current reform discussions. However, preserving the credit union tax status is a top Credit Union National Association (CUNA) priority, and CUNA will remain engaged and vigilant as tax reform discussions move forward.

NCUA bans two from CU work

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ALEXANDRIA, Va. (6/28/12)--The National Credit Union Administration (NCUA) on Wednesday blocked former KBR CU employee Edgar Hugh Kelly and former Hingham  (Mass.) FCU employee Joanne Taylor from participating in the affairs of any federally insured financial institution.

Kelly, who worked for the Tacoma, Wash., credit union, was recently convicted of theft from a lending, credit, or insurance institution and sentenced to 33 months in prison and three years of supervised release. He will also pay $440,000 in restitution.

Taylor  is scheduled to serve five years of supervised release and will pay $35,000 in restitution. She was convicted of larceny by a credit union employee.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link to access all NCUA prohibition orders.

For the full NCUA release, use the resource link.

CUs DNC join in Charlotte playground project

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WASHINGTON (6/28/12)--More than 75 volunteers from local credit unions, joined by Credit Union National Association (CUNA), North Carolina Credit Union League (NCCUL), National Journal Group and Democratic National Convention Committee (DNCC) staff, gathered Wednesday at Levine Children's Hospital in Charlotte, N.C., to lend a hand in an ongoing rooftop playground renewal project.

Wednesday's playground renovation efforts received extensive local media coverage, as demonstrated here, in a group shot with volunteers and a local news reporter. (Photo provided by the North Carolina Credit Union League)
The volunteers decorated and assembled a permanent art installation that will be displayed outside the 12th floor rooftop playground, and worked with patients to decorate garden-themed arts and crafts projects, including birdhouses. Volunteers also had an opportunity to tour Levine Children's Hospital and learn about the impact their efforts will have on patients.

A touch-activated light and color "bubble wall," a deck and pavilion, outdoor play equipment, and much-needed environmental improvements are also being added as part of this playground project.

NCCUL President/CEO John Radebaugh, Carolinas Credit Union Foundation President/CEO John McGrail, and DNCC Senior Advisor Cameron Moody and Charlotte in 2012 Convention Host Committee Executive Director Dr. Dan Murrey also joined in the volunteer efforts.

Radebaugh said his group was "excited to put the credit union philosophy of people helping people into action by helping with this worthy project."

The playground renovations are part of a "leave behind" project, which is in honor of this summer's 2012 Democratic National Convention in Charlotte. Credit unions have honored the host cities for each national convention with a "leave behind" project that benefits local communities since 2000, and a similar project is underway at All Children's Hospital in St. Petersburg, Fla. (See related June 14 News Now story: CUs, CUNA 'dig in' on playground renovation)

"Credit unions really see this as an opportunity to leave something positive behind that will continue to benefit the Charlotte and Tampa communities long after the balloons have dropped and the convention ended," CUNA President/CEO Bill Cheney said.

The two 2012 projects will cost a combined $600,000, and credit unions nationwide, as well as the Carolinas Credit Union Foundation and the League of Southeastern Credit Unions Foundation have raised funds for the projects.

Senates Hatch among CU-backed primary winners

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WASHINGTON (6/28/12)--Credit union-backed candidates took part in many primary contests this week, and Tuesday's results were mostly positive for credit unions, Credit Union National Association (CUNA) Vice President of Political Affairs Trey Hawkins said.

In one of Tuesday's highest profile contests, six-term incumbent Sen. Orin Hatch (R-Utah) defeated his Republican primary opponent, former Utah State Sen. Dan Liljenquist, by winning 67% of votes cast. Hatch, who is the highest ranking minority member on the Senate Finance Committee, was supported by the Credit Union Legislative Action Council (CULAC) and Utah credit unions. Hatch will face another former state senator, Scott Howell (D), this fall, but Hatch is widely expected to retain his seat.

Another credit union- and CULAC-backed incumbent, Rep. Doug Lamborn (R-Colo.), also won his primary contest with more than 60% of the vote. Lamborn defeated community bank vice chairman Robert Blaha, and he may not face a Democratic opponent in November. He is expected to retain his seat, which represents a heavily Republican district encompassing Colorado Springs, Colo., and surrounding suburbs.

New York State Assemblyman Rory Lancman, who was also supported by CULAC, fell short in his House primary contest. Fellow Assemblywoman Grace Meng defeated Lancman to win the Democratic nomination, and will face Dan Halloran (R) for the right to take on Rep. Gary Ackerman's U.S. House seat next year. Ackerman, who has represented portions of Long Island and Queens for 15 terms, is not running for re-election.

CUNA urges congressional action on NFIP extension

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WASHINGTON (6/28/12)--The Credit Union National Association (CUNA) on Wednesday urged members of the U.S. Congress to enact a five-year extension of the National Flood Insurance Program (NFIP) before the program's current authorization expires on July 31.

The Senate could vote this week on legislation that would extend the NFIP for five years and make some reforms to the program. Similar legislation has also been introduced in the House, but a vote on that legislation has not been scheduled.

While CUNA supports both the House and Senate NFIP extension bills, CUNA in the letter also asked legislators to include language addressing force-placed flood insurance in a final version of NFIP legislation.

Forced-place insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer.

The House bill includes language that would allow lenders to charge borrowers for costs of premiums and fees incurred by the lender after borrowers required to have flood insurance either cancel or let the required policy lapse--and then fail to purchase flood insurance within 45 days after notification of that lapse.

"This language is important because it removes any ambiguity and clarifies that in such cases the lender or servicer may charge the borrower for the premiums or fees incurred for coverage beginning on the date which flood insurance coverage lapsed or did not provide a sufficient coverage amount," wrote CUNA President and CEO Bill Cheney. "We hope this language can be included in the bill that Congress ultimately enacts," he added.

The NFIP is scheduled to expire on July 31.

ATM bill vote a step forward for CUs CUNA

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WASHINGTON (6/28/12)--The House Financial Services Committee unanimously approved legislation that would ease duplicative ATM disclosure regulations on Wednesday, and Credit Union National Association (CUNA) President/CEO Bill Cheney said this committee approval was "a big step toward rectifying a problematic case of regulatory redundancy."

The bill, H.R. 4367, would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee.

CUNA has stressed that existing ATM disclosure requirements are creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits. Outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent noncompliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb.

Credit unions are spending around $2,000 per ATM machine to comply with the physical ATM notice requirement, and many credit unions that find themselves subject to legal action are settling lawsuits to avoid the cost of litigation. Credit unions that are spending money and resources to comply with these ATM regulatory requirements, and to address trumped up regulatory violations, are less able to serve their members, CUNA has noted.

Cheney thanked the committee for responding positively to CUNA's arguments about the need to fix this problem and spare credit unions from duplicative costs that provide no added benefit to consumers.

"The fact is that on-screen disclosures have eliminated the need for a physical notice on ATM machines. The bill passed by the House Financial Services Committee is a common-sense solution that will alleviate an unnecessary compliance burden and reduce instances of baseless litigation," Cheney added.

The bill was introduced by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) in April and has 130 co-sponsors. A House roll call vote on H.R. 4367 could come soon after Congress returns from the planned July 4 district work period, and committee members said that they hoped the bill could be moved on to the Senate quickly.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said CUNA has already contacted senators and their staff to develop a plan for getting this legislation through the Senate as quickly as possible. "As we have seen over the last few years, getting a bill through the Senate is not always easy, but we are hopeful that the broad support the bill earned in the House as well as the straightforward nature of the legislation will facilitate its consideration and passage in the Senate," he added.

CUNA will continue to press Congress to enact this bill as quickly as possible, Cheney said.

Inside Washington (06/27/2012)

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  • WASHINGTON (6/28/12)--A group of bankers' banks are urging prompt extension of full Federal Deposit Insurance Corp. (FDIC) coverage for nearly $1.3 trillion in small-business deposits, according to the Independent Community Bankers of America. Bankers' banks are financial institutions that serve community banks. They are owned by investor banks and may provide services only to community banks. In a letter to congressional leaders, 15 bankers' banks that serve more than 5,000 community banks said extending the FDIC's transaction account guarantee (TAG) insurance beyond its Dec. 31 expiration date is necessary to preserving community bank liquidity and small-business lending capacity. "In the current challenging economic environment, an abrupt contraction in liquidity would pose an unacceptable risk to credit availability and the economic recovery," the bankers' banks wrote. "We ask that the Congress extend the FDIC TAG program at the earliest possible opportunity. Banks fully pay for this FDIC insurance coverage through their insurance premiums and no taxpayer money is used" …
  • WASHINGTON (6/28/12)--The Basel Committee on Banking Supervision has published a set of disclosure requirements on the composition of banks' capital. The requirements are designed to improve the quality of the disclosures detailing how institutions are complying with Basel III. The requirements are set out in five sections: 1) a breakdown of regulatory capital until Jan. 1, 2018, when the transition period for the phasing-in of deductions ends; 2) reconciliation requirements; 3) a description of capital instruments used; 4) disclosure requirements; and 5) a disclosure of capital components that are benefiting from the transitional arrangements …
  • WASHINGTON (6/28/12)--Federal Reserve Chairman Ben S. Bernanke will host a town hall meeting with educators nationwide at 2:30 p.m. ET on Aug 7. The educators will join the Bernanke in Washington, D.C., and will gather in Federal Reserve Bank offices throughout the country to participate via videoconference. Bernanke will give brief remarks about the importance of personal financial education and then respond to questions from both in-person and videoconference participants. Bernanke hosted a similar town hall in September 2010. The event will be webcast live

NEW ATM disclosure bill moves on to House

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WASHINGTON (UPDATED: 10:45 A.M. ET, 6/27/12)--Legislation that would help credit unions and other financial institutions by easing duplicative ATM regulations was unanimously approved by a House Financial Services Committee voice vote today, and could see a full U.S. House vote soon after the July 4 recess.

The bill, H.R. 4367, would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee.

These ATM disclosure requirements are creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits. The Credit Union National Association (CUNA) has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent noncompliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb.

Committee members said they hoped the bill could be voted on by the House, and moved on to the Senate quickly.

CUNA President/CEO Bill Cheney said committee approval is "a big step toward rectifying a problematic case of regulatory redundancy," and CUNA will continue press Congress to enact this bill as quickly as possible.

Mortgage fraud SARs continue to drop

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WASHINGTON (6/27/12)--The total number of mortgage loan fraud suspicious activity reports (MLF SARs) filed with the Financial Crimes Enforcement Network (FinCEN) again declined, with financial institutions filing 31% fewer MLF SARs in the first quarter of 2012 than they did in the first quarter of 2011.

A total of 17,651 MLF SARs were filed in the first quarter of 2012. Nearly 25,500 were filed in the first quarter of 2011, according to FinCEN. The recent MLF SAR high of 29,558 was achieved in the second quarter of 2011, and the number of MLF SARs appears to have declined steadily since then. However, FinCEN Director James Freis earlier this year had said it was too soon to call this decline a trend.

Eighty two percent of the MLF SARs filed in the first quarter of 2012 related to activities that occurred more than two years before they were filed, and 72% occurred more than four years before the SAR was filed. Nearly half of the MLF SARs related to suspicious activities that began more than five years ago.

"This increase in very dated SARs could indicate that filers are still working through the backlog of bad loans originated in the 2006-2007 housing bubble," FinCEN said.

States that were hardest hit by the mortgage mess were among those that filed the highest number of MLF SARs during the quarter. Financial institutions in California, Nevada and Florida led the way in MLF SAR filings.

Forty-one percent of suspicious transactions were reported and stopped before they could be completed, and Freis said SARs remain "a tremendous tool to flag new criminal techniques, trends, and patterns, and to help identify and hold accountable those involved in organized and repeated criminal schemes."

Just over one-in-five of the fraud attempts reported in the first quarter of 2012 involved instances in which borrowers overstated their total income on finance forms. FinCEN also noted that fraudulent debt elimination schemes accounted for 14% of MLF SARs filed during the quarter, a five percentage point increase over the 9% total reported in 2011's first quarter. The number of appraisal fraud schemes reported fell to 3% during the quarter, a decrease from the 12% total reported in the first quarter of 2011.

FinCEN also detected some patterns in the suspicious activity reports. Certain mortgage and debt relief scammers were named several separate times in various MLF SARs, and several foreclosure rescue scams continued to falsely claim affiliation with the banks that serviced a given borrower's mortgage. The MLF SARs also uncovered a scheme in which a real estate professional shopped for more than one dozen short-sale properties using identical proof of funds documents and purchase agreements.

For the full FinCEN report, use the resource link.

CFPB arbitration review should target unregulated CUNA

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WASHINGTON (6/27/12)--Noting that most credit unions do not use pre-dispute arbitration agreements in their consumer contracts, the Credit Union National Association (CUNA) urged the Consumer Financial Protection Bureau (CFPB) to focus on unregulated product and service providers as it examines the use of pre-dispute arbitration agreements in consumer contracts.

Other than credit card agreements, the CFPB should not focus on any particular markets for consumer financial products and services when it reviews the prevalence of pre-dispute arbitration agreements, CUNA Assistant General Counsel Luke Martone added in a comment letter to the CFPB.

CUNA also suggested the CFPB examine the impact and purpose of the pre-dispute arbitration agreements, instead of directing its review to the prevalence of particular terms in the agreements.

Arbitration agreements are often added to account and financial product contracts between financial institutions and their members or consumers.

The Dodd-Frank Wall Street Reform Act requested that the CFPB study the use of arbitration agreements in consumer financial services contracts. As a first step, the agency requested suggestions on the scope, methods and data sources it should use in its study. The results of the study will be reported to the U.S. Congress.

CUNA in the letter said it supports the CFPB's attempts to evaluate how the use of pre-dispute arbitration agreements impacts consumers, and agreed that the CFPB should analyze the types and frequency of claims that consumers bring in arbitration. However, CUNA added, the agency should also consider and minimize any potential burdens that may be imposed on credit unions as a result of the study.

Military fin lit efforts discussed in Senate hearing

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WASHINGTON (6/27/12)--Educating servicemembers on their financial services options, and communicating basic financial literacy concepts, can be a challenging process. Witnesses at a Tuesday Senate Banking Committee hearing detailed their own work to improve financial literacy in the military and help shield members of the military from future financial issues.

Consumer Financial Protection Bureau (CFPB) Office of Servicemember Affairs leader Holly Petraeus during the hearing said her office is working hard to fulfill its mission to work on consumer financial education and consumer-protection measures for military personnel and their families. One obstacle to financial literacy efforts, she said, is the spread out nature of the military, which has facilities across the nation and the world.

New military recruits at one Air Force base had an average of $10,000 in debt when they arrived at their post, Petraeus noted.

Petraeus said she hopes the CFPB and others can reach incoming servicemembers before they attend initial boot camps, to give them "'just-enough and just-in-time' financial lessons that could be very helpful before they get that first military paycheck and start thinking of ways to spend it." Her office has developed a short financial-education curriculum that can be delivered via smartphone or computer after an individual has signed up for the military, but before they have begun their training. Petraeus said the Pentagon and senior military officials are enthusiastic about the planned education efforts, and have signaled their intent to help the CFPB field the program.

She also said she wants to enhance the CFPB's ongoing educational efforts through online and electronic means, such as websites and mobile apps, and hopes that these efforts would help increase the financial literacy of servicemembers' spouses as well.

Overall, Petraeus said, the CFPB's efforts seek to make financial education less of a lecture and more of a cooperative effort.

Delaware Attorney General and Delaware Army National Guard Major Beau Biden said the National Guard has stepped up its own financial literacy efforts, and noted that he has heard of many commanding officers that have stepped in, at times, to help their subordinates navigate financial issues.

Credit unions provide financial education and resources to servicemembers and their families in a variety of formats, including deployment briefings and guides to help soldiers prepare before they are deployed abroad. These financial efforts address steps servicemembers can take before, during and after they are deployed to achieve various financial goals.

Servicemembers and their families are members of more than 330 credit unions with military or defense-related charters that serve over 18 million memberships. Many credit union products that are provided through both on- and off-post credit union branches are specifically designed for servicemembers, veterans and their families, and address issues like active deployments, military relocations, and other circumstances.

The Defense Credit Union Council also represents the interests of credit unions that operate on military installations, and works closely with the Pentagon and member credit unions to coordinate policy, procedures and legislation impacting morale and welfare, financial readiness, and the delivery of quality financial products and services to Department of Defense personnel and their families. The council comprises 235 credit unions serving more than 14 million members.

For more on the hearing, use the resource link.

Inside Washington (06/26/2012)

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  • JAMESBURG, N.J. (6/27/12)--National Credit Union Administration (NCUA) Board Member Michael E. Fryzel, at the invitation of New Jersey Credit Union League President Paul Gentile, addressed credit union CEOs and leaders at a breakfast in Jamesburg, N.J., Tuesday. During his presentation, Fryzel urged New Jersey credit unions to continue helping their members who are struggling financially. "The state of New Jersey continues to face economic struggles, as does the nation," Fryzell said. "It is important that you continue to provide your members with the services and loans they need. Credit unions have shown the country they remain true to their principles: They have kept lending and kept helping their members and one another without costing the American taxpayers a single dollar. You must take this opportunity to boost credit union participation and good works to an even higher level." Other topics Fryzel addressed included the status of NCUA's Corporate Resolution Plan, economic issues affecting consumer credit unions, pending NCUA rulemakings, the proposed rules of other federal agencies and the future of credit unions. After his address Fryzel took questions from the audience …
  • WASHINGTON (6/27/12)--Between five and 10 large banks are expected to submit living wills by July 1, posing a critical test for both banks and regulators and their efforts to end "too big to fail," as mandated by the Dodd-Frank Act. The living wills, which are documents that explain how banks would divide up their assets if they fail, could run to thousands of pages, according to some observers (American Banker June 26). Regulators have indicated that banks are unlikely to fail the first round of reviews, but the initial submissions are likely to influence future expectations, said Sylvia Mayer, a partner at Weil, Gotshal & Manges. Each draft will include a public portion, representing only a small part of the overall plan that will provide an overview of the bank's resolution strategy. Regulators are very likely to review the initial plans and come back to institutions with pages of questions, said John Lane, a former Federal Deposit Insurance Corp. official who is now a special adviser at Promontory Financial Group …

CDRLF grant applications due June 29

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ALEXANDRIA, Va. (6/27/12)--Low-income credit unions (LICU) have until June 29 to apply for the $1.3 million available this year for technical assistance grants through the Community Development Revolving Loan Fund (CDRLF).

Applications for CDRLF reduced-rate loans, however, will be accepted from LICUs through the rest of the year or until the associated $11 million in funds is exhausted.

The National Credit Union Administration (NCUA) sent out a reminder yesterday that LICUs have until 5 p.m. (ET) Friday to participate in the 2012 application process for CDRLF grants of up to $25,000. The agency's Office of Small Credit Union Initiatives administers the CDRLF.

The 2012 CDRLF funding round is the first using the NCUA's new automated online application process, intended to  make it much easier to accesses the free funding.

The NCUA has prioritized grants for:
  • Financial literacy and education in school branches;
  • New product and service development;
  • Staff, official, and board member training;
  • Student and job creation internships; and
  • Volunteer Income Tax Assistance.
To help any credit union learn about the CDRLF grant program the NCUA has posted a video  on its YouTube channel , issued guidance in a Letter to Credit unions, and posted grant application guidelines to its website (use links to access these resources).

Credit unions may obtain CDRLF loans up to $300,000, but a new rule adopted by the NCUA  last year allows higher loans on a case-by-case basis. For 2012, NCUA has set the interest rate at a record low of 0.4%.

Cheney urges full MBL support at CU exec meeting

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WASHINGTON (6/26/12)--Addressing a group of Washington, D.C.-area credit union executives Monday evening, Credit Union National Association (CUNA) President/CEO Bill Cheney urged all credit unions to rally behind the effort to convince the U.S. Congress to increase the cap on member business lending (MBL).

Click to view larger imageMACUMA Chairman John Hayez (left), COO of United States Senate FCU, Washington, D.C., and CUNA President/CEO Bill Cheney (right) greet one another as Cheney arrives to address the monthly meeting of D.C.-area credit union executives. (CUNA Photo)
Cheney, addressing the Metropolitan Credit Union Management Association's (MACUMA) monthly meeting, reported that CUNA has helped facilitate over 90,000 grassroots contacts with federal lawmakers in favor of legislation to increase the cap.

"Even if your credit union never intends to make a business loan, it's important that we have the ability to pass proactive legislation to enhance the credit union charter.

"A win will be a huge shot in the arm not just on this issue, but on all our future efforts to enhance the charter," Cheney said.

Credit unions can make a difference in helping the economy grow and recover through increased member business lending, Cheney told the credit union group.

He underscored that the MBL legislation has the strong backing of many small business groups, as demonstrated, for instance, in February when CUNA sponsored a "Small Business Hike the Hill," where credit unions brought their small business borrowers to Capitol Hill in support of credit union business lending legislation.

Pending legislation in both the House (H.R. 1418) and Senate (S. 2231) would increase the MBL cap to 27.5% of assets, up from 12.25%.  Senate Majority Leader Harry Reid of Nevada has said the Senate bill, sponsored by Sen. Mark Udall (D-Colo.), will be voted this session.

"As I've discussed with Sen. Udall many times," Cheney said Monday evening, "our goal is not to just have a vote, our goal is to win a vote. We're making progress. We're very close to 60 votes."

He added a key factor is that senators are hearing directly from small businesses. "That's making all the difference in the world."

Cheney also discussed other credit union priority issues, including an ATM disclosure bill that is up for a House committee vote this week.

Cheney noted CUNA's strong support of the ATM bill (H.R. 4367) that was introduced by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) in April.

The bill would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under Luetkemeyer-Scott legislation, ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee.

Cheney noted CUNA has worked hard over the last several weeks to move the legislation to a markup, meeting with a majority of the members of the House Financial Services Committee on the legislation, which has 120 co-sponsors and now is scheduled for Wednesday House Financial Services Committee vote.

This legislation addresses one example of an unnecessary regulatory burden for credit unions, Cheney told the MACUMA assembly, a burden that provides no off-setting benefit to consumers. He said fighting unnecessary operational burdens is a top CUNA priority and noted a recent National Credit Union Administration troubled debt restructuring (TDR) rule as an example of the positive impact CUNA and credit unions can have on the rulemaking process.

Under the new rule, credit unions soon will be allowed to modify TDR loans without having to immediately classify those loans as delinquent.

CUNA and credit unions had alerted the NCUA that under existing rules many credit unions were struggling to work with homeowners unable to pay their mortgage due to financial difficulties.

Cheney pointed out the NCUA Chairman Debbie Matz herself credited credit union trade associations and volunteers with first bringing this TDR issue to the agency's attention.

Another timely topic highlighted Monday night by the CUNA leader involves the "leave behind" projects CUNA and regional credit unions are involved in to honor the Republican and Democratic national conventions in Tampa, Fla., and Charlotte, N.C., respectively.

This Wednesday, Cheney noted, CUNA and credit union representatives will be in Charlotte at a volunteer day to work on a rooftop playground renovation project at Levine Children's Hospital. Earlier in June, a CUNA and credit union contingent rolled up their sleeves to support a similar effort at All Children's Hospital in St. Petersburg, Fla. That project will retrofit an existing playground with special play equipment for the hospital's young patients.

Cheney noted that CUNA and credit unions have earned national recognition for their charitable "leave behind" projects since 2000.

ACH security should avoid redundancy CUNA tells NACHA

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WASHINGTON (6/26/12)--NACHA--The Electronic Payments Association should minimize compliance costs for credit unions, and look for ways to eliminate redundancies, as it develops a final version of its pending automated clearinghouse (ACH) security changes, the Credit Union National Association (CUNA) said in a recent comment letter.

Under NACHA's ACH security framework proposal, credit unions and other financial institutions and groups that take part in ACH transactions would be required to protect the confidentiality and integrity of certain sensitive consumer information, and to prevent third parties from accessing that information.

Credit unions and others that handle ACH data also would need to verify, as part of their yearly ACH Rules Compliance Audits, that they have established, implemented, and updated data security policies, procedures and systems to comply with the proposed security requirements.

The proposed NACHA rule changes are scheduled to become effective on Sept. 20, 2013.

In a comment letter, CUNA Regulatory Counsel Dennis Tsang said CUNA appreciates NACHA's efforts to improve the security and integrity of the ACH network. However, the ACH security framework should not impose specific requirements, such as specific security policies, procedures, and systems.

The letter suggested NACHA's security framework could instead allow entities that are subject to the data security rules to implement ACH security on protected information based on their own individual business and risk needs.

NACHA should also modify the framework to provide additional flexibility for institutions that use mobile and online applications in their business practices, he said.

CUNA also encouraged NACHA to minimize data security standard redundancies, noting that credit unions are already subject to data security requirements that are issued by the National Credit Union Administration, Federal Financial Institutions Examination Council, and other regulators.

For the full letter, use the resource link.

CUNA meets with CFPB on CU priorities

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WASHINGTON (6/26/12)--Credit Union National Association (CUNA) in a Monday meeting urged Consumer Financial Protection Bureau (CFPB) officials to ease credit unions' regulatory burdens and to consider the extent to which credit unions could be exempt from certain requirements.

Other key issues that were discussed during the meeting with CFPB Assistant Director for Regulations Leonard Chanin and other agency staff at CFPB's headquarters in Washington included the need for credit unions to have flexibility in offering overdraft protection plans. CUNA also recommended the agency consider addressing issues relating to redundant outside ATM notices that have spawned recent lawsuits against credit unions and other institutions.

Multi-featured open-end lending programs, remittance transfer regulations, Regulation Z, the CFPB's pending mortgage disclosure revisions, and mortgage servicing issues were also discussed during the meeting.

In the meeting, CUNA stressed that the Dodd-Frank Wall Street Reform Act gives the CFPB the authority to exempt any class of institution it regulates from any of its rules. Credit unions, as a whole, have a strong track record of working with their members and helping them make informed financial decisions, CUNA said, adding that the CFPB should use its exemption power to help ease the burden faced by these credit unions.

The CFPB should also use its regulatory authority to eliminate redundant ATM disclosures, which are of questionable utility to consumers and are subjecting credit unions to needless costs and potential lawsuits, CUNA said during the meeting. The agency could revise its Regulation E requirements to no longer mandate duplicate ATM notices, CUNA added. In the alternative, CUNA staff discussed moving the outside notices to the ATM welcome screen.

Under current ATM notice requirements, credit unions and other financial institutions must display at each ATM location that fees will or may be charged. More detailed ATM fee information must also be provided before the transaction is completed, either by showing it on the ATM's screen or providing the ATM user with a small printed disclosure before the consumer is committed to paying the fee.

ATM placards posted on the outside of the machine are being intentionally removed or destroyed, and pictures of the damaged ATMs are then being used as evidence in non-compliance lawsuits against credit unions and other institutions. These lawsuits number in the hundreds, and some institutions are settling with plaintiffs to avoid legal costs, CUNA has noted.

A legislative fix to address this ATM issue has also been introduced, and that legislation is scheduled to be marked up during a Wednesday House Financial Services Committee hearing. The bill, H.R. 4367, had 120 cosponsors as of Monday.

CUNA Deputy General Counsel Mary Dunn, Senior Assistant General Counsel Jared Ihrig, Assistant General Counsel Luke Martone and Regulatory Counsel Dennis Tsang represented CUNA at the meeting.

BSA e-filing deadline is July 1

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WASHINGTON (6/26/12)--Electronic filing of all Bank Secrecy Act (BSA) reports will become mandatory on July 1, Credit Union National Association (CUNA) reminds credit unions. The Financial Crimes Enforcement Network (FinCEN), however, has been encouraging financial institutions for weeks to begin using its BSA e-filing system "as soon as possible."

Currency Transaction Reports, Designations of Exempt Persons, and Suspicious Activity Reports are among the reports that can be e-filed. Almost all BSA reports will need to be e-filed as of July 1, FinCEN said, but Currency and Monetary Instrument Reports are not covered under the e-filing requirement.

FinCEN has said the switch to all-electronic BSA filing would improve efficiency, reduce costs for the financial industry, and enhance the ability of investigators, analysts, and examiners to gain better and more timely access to important financial information. Increased BSA E-Filing would also help speed up financial crime investigations, the agency added.

Financial penalties may be imposed on institutions that file non-electronic reports after the deadline, FinCEN said.

Small credit unions and other institutions that do not have internet connectivity, and file few BSA reports, were permitted to file hardship exemption requests ahead of the deadline. However, FinCEN noted, these exemption requests would only shelter those institutions from the e-filing requirements until March 31, 2013.

Some credit unions and other financial institutions that have the technical ability to e-file BSA Currency Transaction Reports (CTR) but are using aggregation systems that are currently incompatible with the BSA E-Filing System's batch and computer-to-computer reporting capabilities were also granted temporary exemptions. Those exemptions would expire on December 31, FinCEN said.

FinCEN has not published a list of organizations that were granted e-filing exemptions. However, the agency has released guidance, an archived webinar, and a list of frequently asked questions to help credit unions and other institutions manage the shift to an e-filing only BSA reporting system.

For these FinCEN resources, click the link.

CUNA has encouraged FinCEN to work with the National Credit Union Administration, state regulators, and third-party vendors to minimize compliance costs related to the e-filing switch. CUNA also suggested FinCEN exempt credit unions with less than $50 million in assets from the e-filing requirements, and grant waivers to credit unions that demonstrate substantial core processing or system costs.

ATM disclosures NFIP among CU issues in Congress

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WASHINGTON (6/26/12)--ATM fee dsiclosures and the National Flood Insurance Program (NFIP) reauthorization remain big issues for credit unions, and both items could see action in Congress this week.

The Flood Insurance Reform and Modernization Act of 2011 (S. 1940), which would extend the NFIP for five years, could be voted on by the full U.S. Senate later this week.

The NFIP is currently scheduled to expire on July 31. The program has been funded by a series of short-term extensions for some time, and NFIP coverage has also lapsed in recent years. Lapses in coverage can cause significant disruption in the mortgage underwriting process for thousands of prospective homeowners, as lenders, including credit unions, are unable to write certain mortgages without NFIP coverage.

House and Senate members alike have called for the NFIP to be extended and reformed, and the White House on Monday said it supported passage of S. 1940. Debate and possibly a vote on legislation that would maintain the 3.4% federal direct student loan interest rate is expected to happen after the Senate finishes any NFIP action. This bill would not impact private student loan rates.

Student loan legislation is also expected to be discussed in the U.S. House this week.

Credit unions will also want to watch this week for a Wednesday House Financial Services Committee markup of legislation that would end duplicative ATM fee disclosure requirements.

The bill would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee.

CUNA last week said current ATM disclosure requirements are creating issues for credit unions, and preventing those credit unions from more fully serving their members. (See related June 20 News Now story: CUNA in The Hill: ATM disclosure issues harm CU members)

A Senate Banking Committee hearing on financial services issues impacting members of the military and their families is scheduled for today.

The following hearings have also been scheduled:

  • A Thursday House Financial Services insurance, housing and community opportunity subcommittee hearing on the appraisal industry and regulations impacting the single-family mortgage market;
  • A Thursday House Financial Services domestic monetary policy and technology subcommittee hearing on fractional reserve banking (a system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal) and its impact on monetary policy;
  • A Thursday Senate Commerce, Science and Transportation Committee hearing on personal data privacy protections; and
  • A Friday House Financial Services insurance, housing and community opportunity subcommittee hearing on mobile payment services.
The House and Senate will both return home for the July 4 district work period at the end of this week. They are scheduled to return to Washington on July 9, and will not recess again until Aug. 3.

Inside Washington (06/25/2012)

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  • WASHINGTON (6/26/12)--Commercial banks and savings associations reported trading revenues of $7 billion in the first quarter, the Office of the Comptroller of the Currency (OCC) reported Friday in the its Quarterly Report on Bank Trading and Derivatives Activities. The revenues were 178% higher than in the fourth quarter of 2011, but 5% lower than in the first quarter of 2011. Net current credit exposure, the primary metric the OCC uses to measure credit risk in derivatives activities, decreased $53 billion, or 12%, to $377 billion during the first quarter. Derivatives contracts are concentrated in a small number of institutions. The largest four banks hold 93% of the total notional amount of derivatives, while the largest 25 banks hold nearly 100%
  • WASHINGTON (6/26/12)--A lawsuit that seeks to wipe out the Consumer Financial Protection Bureau (CFPB) faces an uphill battle, but the case could still have an impact on the agency's operations, according to industry insiders. In responding to the complaint, filed by State National Bank of Big Spring, Texas, the Competitive Enterprise Institute and the 60 Plus Association, the CFPB is likely to make statements acknowledging limitations on what it can do, impacting its authority, according to Joseph Barloon, a bank industry lawyer at the law firm Skadden Arps in Washington, D.C. (American Banker June 23). The suit alleges the CFPB is unconstitutional because it is unaccountable to Congress, the president or the courts. It also challenges the constitutionality of the Financial Stability Oversight Council and the recess appointment of Richard Cordray as the CFPB's director …
  • WASHINGTON (6/26/12)--Jeremy C. Stein and Jerome H. Powell on Monday were formally sworn in as members of the Board of Governors of the Federal Reserve System at a ceremony, with Federal Reserve Chairman Ben S. Bernanke presiding. Stein assumed his position on May 30, and Powell assumed his position on May 25, following their confirmation by the Senate on May 17. Prior to his appointment to the board, Stein was the Moise Y. Safra Professor of Economics at Harvard University, where he taught courses in finance in the undergraduate and Ph.D. programs. Powell was a visiting scholar at the Bipartisan Policy Center in Washington, D.C., where he focused on federal and state fiscal issues. Stein's term expires Jan. 31, 2018. Powell's term expires Jan. 31, 2014 …
  • WASHINGTON (6/26/12)--The National Credit Union Administration has rescheduled a planned July 24 closed board meeting, moving that meeting to Monday, July 23. The meeting is set to start at 2 p.m. ET...

Inside Washington (06/22/2012)

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  • WASHINGTON (6/25/12)--Both Democratic and Republic lawmakers on Thursday questioned whether new regulations on money market funds are needed to protect to consumers in the event of a future financial crisis. The reforms are advocated by Securities and Exchange Commission Chairman Mary Schapiro, who appeared before the Senate Banking Committee. Senators argued that the money market fund industry contains little risk and has demonstrated resilience over time (American Banker June 22). Schapiro noted that during the 2008 financial crisis one money market fund's value fell below $1 per share, and the federal government took measures to support the industry. Schapiro presented two options for reform. Under one alternative, the share prices of funds would float based on the value of their underlying assets. Under the other option, the funds would maintain a level value, but they would require capital buffers, and restrictions or fees could be placed on exemptions …

U.S. Central could be wound down by October NCUA

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ALEXANDRIA, Va. (6/25/12)--The National Credit Union Administration (NCUA) late last week said it expects to complete its winding down of U.S. Central Bridge Corporate FCU's Automated Clearing House (ACH) services by Sept. 30, 2012.

In a letter to credit unions (12-CU-06) released on Friday, the NCUA said the corporate credit union transition process "has progressed more smoothly than originally anticipated." The agency expects all of U.S. Central's ACH services to be unwound, and transitioned to other providers, three months ahead of the scheduled Dec. 31, 2012 deadline.

The NCUA said all other correspondent services offered by US Central Bridge have already been wound down, so the failed corporate could be completely wound down by the end of October. This move would help reduce corporate resolution costs for credit unions, the agency said.

According to the agency, the following corporates are transitioning to other ACH providers, or have already moved on to other providers: Alloya Corporate FCU; Catalyst Corporate FCU; Central Corporate CU; Corporate America CU; Corporate One Federal CU; First Carolina Corporate CU; First Corporate CU; Kansas Corporate CU; Kentucky Corporate FCU; Louisiana Corporate CU; Missouri Corporate CU; Southeast Corporate FCU; SunCorp FCU; Treasure State Corporate CU (merged into Kansas Corporate CU); TriCorp FCU; Volunteer Corporate CU; and Western Bridge Corporate FCU.

The NCUA has said that ensuring uninterrupted service for natural person credit unions is a top priority during the corporate credit union transition process.

U.S. Central Bridge Corporate was chartered by the NCUA in late 2010 to provide the payment and settlement services of the failed U.S. Central Corporate FCU while the agency worked on a long-term corporate credit union resolution plan, and member credit unions found new service providers.

For the full NCUA letter, use the resource link.

NCUAs TCCUSF receives clean 2011 audit

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ALEXANDRIA, Va. (6/25/12)--The National Credit Union Administration's (NCUA) Temporary Corporate Credit Union Stabilization Fund (TCCUSF) has again received a clean audit, the agency announced.

The audit, which was performed by KPMG, LLP, covered the TCCUSF's 2011 financial statements. NCUA Chairman Debbie Matz said the clean audit was "very welcome news." The NCUA in a release noted it has improved its own internal controls, and has continued to strengthen the systems needed to handle the TCCUSF's many complex transactions, including those related to the NCUA Guaranteed Notes.

These improvements allowed the auditors to complete their examination of the TCCUSF statements six months earlier than they were completed in 2011, and Matz said the 2012 TCCUSF audits should be made in a similarly timely fashion next year.

Matz in a Friday statement said the agency is currently updating loss projections for the corporate credit union system resolution. The projections will be issued by the end of this month, she added.

Credit Union National Association (CUNA) Chief Economist Bill Hampel said he is reviewing the latest NCUA TCCUSF financials to determine what they imply for the remaining assessments to be paid by credit unions.

The agency last year assessed a 25 basis point (bp) TCCUSF premium for 2011, and the 2012 TCCUSF assessment could be discussed at the agency's upcoming July open board meeting.

NCUA Director of Examinations and Insurance Larry Fazio recently said the 2012 assessment is expected to be "within the range of 8 to 11 basis points as provided back in November 2011 for credit union budgeting purposes." CUNA earlier this year predicted the 2012 corporate stabilization assessment would be around nine bp of insured shares.

For the NCUA release, use the resource link.

Future of CUs corporates covered in NCUA video

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ALEXANDRIA, Va. (6/25/12)—The latest corporate credit union system news, as told by National Credit Union Administration (NCUA) Office of Corporate Credit Unions Deputy Director David Shetler, is a key component of the NCUA's latest YouTube economic briefing.

In the video, Shetler covers the latest corporate credit union developments, and explains how these developments could impact corporates going forward.



NCUA Chief Economist John Worth also outlines what recent changes in housing, labor and consumer goods markets could mean for natural person credit unions.

This video is the latest in a series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The videos can also be viewed on the NCUA's YouTube page by using the resource link below.

NEW NCUAs TCCUSF receives clean 2011 audit

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ALEXANDRIA, Va. (UPDATED: 12:00 P.M. ET, 6/22/12)--The National Credit Union Administration's (NCUA) Temporary Corporate Credit Union Stabilization Fund (TCCUSF) has again received a clean audit, the agency reported today.

The audit, which was performed by KPMG, LLP, covered the TCCUSF's 2011 financial statements. NCUA Chairman Debbie Matz said the clean audit was "very welcome news."

The NCUA in a release noted it has improved its own internal controls, and has continued to strengthen the systems needed to handle the TCCUSF's many complex transactions, including those related to the NCUA Guaranteed Notes.

These improvements allowed the auditors to complete their examination of the TCCUSF statements six months earlier than they were completed in 2011, and Matz said the 2012 TCCUSF audits should be released in a similarly timely fashion next year.

Matz said agency staff is currently updating loss projections for the corporate credit union system resolution. The projections will be issued by the end of this month, she added.

For the NCUA release, use the resource link.

Remittance rule should protect consumers CUNA trades

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WASHINGTON (6/22/12) —The Consumer Financial Protection Bureau's (CFPB) pending remittance rule, as currently constructed, "will significantly diminish the availability of international transfer services and increase the cost of such services for consumers," the Credit Union National Association (CUNA) and other financial services trade groups said in a letter to members of the U.S. Congress.

The letter was submitted for the record of a Thursday House Financial Services financial institutions and consumer credit subcommittee hearing on money service business supervision. The Clearing House Association L.L.C., the Consumer Bankers Association, the Financial Information Forum, the American Bankers Association, The Financial Services Roundtable, the Independent Community Bankers of America, NACHA – The Electronic Payments Association, and the National Association of Federal Credit Unions all co-signed the letter.

Under a new remittance rule adopted by the CFPB earlier this year, remittance transfer providers would be required to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes. The rule is scheduled to become effective on Feb. 7, 2013.

The remittance regulation broadly defines the term "remittances" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S., other than most transfers involving credit, debit, and prepaid cards. The joint letter said this definition "is inconsistent with the traditional understanding of what constitutes a remittance transfer and is so broad that it will capture all consumer-initiated international electronic fund transfers regardless of their value or purpose."

The letter added that the CFPB's proposed 25-transaction-per-year safe harbor to exempt providers from being considered a "remittance transfer provider" is too low to provide meaningful relief to institutions that truly do not offer remittance transfer services "in the normal course of business." The exemption will not prevent hundreds of financial institutions from exiting the market, the letter warned.

Moreover, the Final Rule places providers at risk for amounts beyond what they received to perform the transfer service: namely fees and taxes charged by other entities, as well as the principal amount of a remittance transfer. This framework creates considerable risk of financial loss that providers will be largely unable to mitigate or manage, encourages active fraud, and threatens the business case for consumer international transfer services.

Many financial institutions may be forced to severely limit their international transfer product offerings or exit the market altogether, the letter said, warning that small institutions may lack the resources to monitor foreign tax laws or changes in fees charged by unrelated financial institutions. Increased compliance costs created by the new regulation could also be passed on to consumers, the letter added.

Consumer access to international funds transfers through their banks, credit unions, and broker-dealers is now in serious jeopardy due to the "nearly impossible compliance challenge" presented by the pending CFPB regulation, the letter added. The letter said more time is needed to appropriately assess and navigate the issues presented by the CFPB remittance regulation.

For the full letter, use the resource link.

SBA MBLs reg relief are CUNA topics at hearing

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WASHINGTON (6/22/12) —While the total number of credit unions' U.S. Small Business Administration (SBA)-supported loans have grown by 89% since December 2007, credit unions could do even more to help small businesses if the U.S. Congress would raise the cap on member business loans (MBL) and provide regulatory relief, Redwood CU President/CEO Brett Martinez told a House subcommittee yesterday.

Click to view larger image Redwood CU President/CEO and CUNA Board Member Brett Martinez told subcommittee members that SBA guaranteed loans and credit union MBLs can both help small business owning credit union members. (CUNA photo)
tinez, who testified on behalf of the Credit Union National Association (CUNA) before the House Small Business investigations, oversight and regulations subcommittee,  said regulatory roadblocks and the 12.25% of assets MBL cap are hurting the ability of credit unions to do more to improve the "fragile economic recovery.'' Martinez is a CUNA board member.

He said his credit union and others are "severely constrained'' by the cap and urged House lawmakers to pass legislation by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) to raise the cap to 27.5% of assets for qualified credit unions.

Martinez, whose 220,000-member, $2 billion-asset Santa Rosa, Calif.-based credit union is the largest SBA credit union lender in the country by loan volume, said his financial institution is at 75% of the cap. If the cap isn't increased, his credit union could only make member business loans for another 18 months, he added. His credit union has about $190 million in outstanding member business loans and $68 million in SBA loans, and has had to sell some of its business loans on the secondary market to stay within the MBL cap, he noted.

He also reiterated CUNA's estimate that MBL cap increase legislation would generate $13 billion in new capital and create 140,000 jobs in the first year following enactment. Those benefits, he pointed out, would come at no cost to the American taxpayer.

In response to a question from the subcommittee chairman, Rep. Mike Coffman (R-Colo.), Martinez said that relatively few credit unions make business loans because the low MBL cap discourages additional credit unions from getting into business lending. Martinez told subcommittee member Janice Hahn (D-Calif.) that credit unions could make more loans if the SBA made the application process easier and provided additional training to credit unions.

He urged lawmakers to extend the SBA 504 refinance loan program and the SBA 504 First Mortgage Lien Pool (FMLP) programs, both of which are scheduled to expire this September.

In response to another question from Coffman, Martinez said when discussing loan options with members his credit union doesn't steer them towards an SBA or member business loan because one or the other is easier for his financial institution. Rather, their primary consideration is which loan is most appropriate for the member.

Others who testified at the hearing were: Tim Dixon, senior vice president, head of Small Business Administration Lending, Citizens Bank, Warrensville Heights., Ohio;   Robert Marquette, president/CEO, Members 1st FCU, Mechanicsburg, Penn.; and David Rader, business executive, SBA Lending, Wells Fargo, Minneapolis, Minn.

Inside Washington (06/21/2012)

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WASHINGTON (6/22/12)--The Office of the Comptroller of the Currency (OCC) has adopted an interim final rule amending its lending limit rule to apply to certain credit exposures arising from derivative transactions and securities financing transactions. Effective July 21, the statutory definition of loans and extensions of credit for purposes of the lending limit will include certain credit exposures arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction. The interim rule applies to both national banks and savings associations. National banks and savings associations have through Jan. 1, to comply with the rule's requirements as to derivative transactions and securities financing transactions. The OCC provided a short-term exception under its lending limits authority to allow time for national banks and savings associations to adjust for compliance with the new standard. To reduce the burden of these new credit exposure calculations, particularly for smaller and mid-size banks and savings associations, the rule permits use in certain circumstances of look-up tables for measuring the exposures for each transaction type. This method permits institutions to adopt compliance alternatives that fit their size and risk management requirements, consistent with safety and soundness and the goals of the statute …

Regulators issue military mortgage guidance

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WASHINGTON (6/22/12)--Credit unions must ensure that they inform their members who are in the military and receive Permanent Change of Station (PCS) orders of any available mortgage assistance options and that they don't engage in any deceptive practices.

Those are among the expectations set forth in guidelines issued by the Federal Reserve, the National Credit union Administration,  the Consumer Financial Protection Bureau and other financial regulators to mortgage servicers.

The guidelines mandate that employees of mortgage loan servicers be adequately trained about the options available for assisting military homeowners with PCS orders. Credit unions and other servicers must provide accurate, clear and readily understandable information about available options including the Making Home Affordable Program and other programs offered through Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veteran's Affairs, and the US Department of Agriculture's Rural Development programs.

The regulators said they are especially concerned about the potential harm that could be caused if servicers do any of the following:

  • Fail to provide homeowners with PCS orders with accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify based on information known to the servicer.  These options should be consistent with the servicer's public representations and agreements with government agencies;
  • Ask homeowners with PCS orders to waive their legal rights under the Servicemembers Civil Relief Act or any other law as a prerequisite to providing information to the homeowner about available options or evaluating the homeowner's eligibility for assistance;
  • Advise homeowners with PCS orders who are current on their loans and able to make the monthly payment to intentionally skip making payments in order to create the appearance that they are having financial difficulties in order to obtain assistance for which they would not otherwise;
  • Fail to provide a reasonable means for homeowners with PCS orders to obtain information on the status of their request for assistance; and
  • Fail to timely communicate the servicer's decision regarding requests for assistance from homeowners with PCS orders and failing to include an explanation of the reason for any denials.
The guidelines do not require servicers to offer any particular loss mitigation programs. However, if  a regulator determines that a servicer has engaged in any acts or practices that are unfair, deceptive or abusive, or that otherwise violate Federal consumer financial laws and regulations, the agency will take appropriate supervisory and enforcement actions and mandate appropriate corrective actions.

The other agencies that signed on to the guidance are the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

To access the guidance, use the resource link.

Guidelines issued on bank foreclosure mistake compensation

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WASHINGTON (6/22/12)--Banks regulated by the Federal Reserve and the Office of the Comptroller Currency might have to pay borrowers between $500 and $125,000 if they make mistakes during the foreclosure process, according to guidelines issued Thursday by those agencies.

The guidance states that remedies may include lump-sum payments, suspension or rescission of a foreclosure, a loan modification or other loss mitigation assistance, correction of credit reports, or correction of deficiency amounts and records.

The agencies also gave a two-month extension, until Sept. 30, for eligible borrowers to request a free review of their mortgage foreclosures under the Independent Foreclosure Review.

Actions by mortgage servicers that could result in having to pay a penalty include, but are not limited to:

  • Foreclosing on a borrower, in violation of the Servicemembers Civil Relief Act.
  • Foreclosing on a borrower who is not in default.
  • Failing to give a qualified borrower a permanent modification if they have complied with the agreement.
  • Foreclosing on a borrower before the expiration of a written modified payment plan. Denying a borrower's loan modification application that should have been approved; and
  • Failing to offer loan modification options as required by an applicable program.
  • Giving a borrower a loan modification with a higher interest rate than should have been charged under the relevant loan modification program.
  • Foreclosing on a borrower in violation of federal bankruptcy laws.
  • Not providing a borrower with proper notification during the foreclosure process.
  • Committing errors that did not result in foreclosure, but resulted in other financial damage.
The guidance also states that if a borrower requests a foreclosure review, he or she is not precluded from taking other actions related to their foreclosures.  A servicer is not permitted to require a borrower to sign a waiver of the borrower's ability to pursue claims against the servicer in order to receive compensation under the Independent Foreclosure Review.

To read the guidelines, use the resource link.

Financial services appropriations ready for House vote

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WASHINGTON (6/21/12)--Financial services appropriations legislation for the 2013 fiscal year will move on to the full House after it was approved by a Wednesday House Appropriations Committee voice vote.

Under the House bill:

  • The National Credit Union Administration's (NCUA) Community Development Revolving Loan Fund (CDRLF) program would receive $500,000 in funding; and
  • The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund would receive $221 million in funding.
The NCUA's Central Liquidity Facility (CLF) is not addressed by the legislation, and, thus, would retain its current lending authority of 12-times its paid-in capital.

Senate appropriations legislation, which awaits action by the full Senate, would provide $233 million in CDFI Fund backing and $1.19 million in CDRLF funds, and would maintain the CLF at its current level.

Final versions of the House and Senate appropriations bills will be subject to a reconciliation process before they are moved on for final approval by President Barack Obama.

The Obama administration requested $1.19 million in CDRLF funds, $221 million for the CDFI Fund, and continued full authority for the CLF in its suggested 2013 fiscal year budget.

Five-year NFIP extension could see Senate vote soon

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WASHINGTON (6/21/12)—Legislation that would extend the National Flood Insurance Program (NFIP) until Sept. 30, 2017, could be debated by the U.S. Senate as soon as next week after Sen. Majority Leader Harry Reid (D-Nev.) filed cloture on Wednesday.

Sen. David Vitter (R-La.) worked closely with Senate leadership to move the latest version of an NFIP extension forward, and Vitter in a Wednesday release said extending the program for a further five years "is great, much needed news for homeowners and the housing market." He said he would urge his fellow senators to support the bill.

Legislation that temporarily extended the NFIP until July 31 was approved in the U.S. House and Senate late last month, just before the insurance program expired on May 30. The program has been funded by a series of short-term extensions for some time, and House and Senate members alike have called for the NFIP to be extended and reformed.

The NFIP lapsed three brief times in 2010. Credit unions, as well as other lenders, cannot write certain mortgages without NFIP coverage, and the Credit Union National Association has noted that lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

Late yesterday, acknowledging that floor action on the long-term NFIP extension was not possible this week, Reid said, "We have to work toward completing that as quickly as we can."

CUNA suggests CFPB mortgage form changes

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WASHINGTON (6/21/12)--The Consumer Financial Protection Bureau (CFPB) continues to work toward a final version of its combined Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) mortgage disclosure form, and the progress of that project, as well as industry impressions on the developing form, were addressed in a Wednesday U.S. House hearing.

The hearing, which was held by the House Financial Services insurance, housing and community opportunity subcommittee, featured testimony from CFPB Deputy Director Raj Date and a second panel of financial services and real estate industry representatives.

Proposed TILA/RESPA forms, and accompanying mortgage disclosure regulations, will be released by July 21, Date said. The regulations are scheduled to be finalized by Jan. 21, 2013.

The Credit Union National Association (CUNA) in a statement submitted ahead of the Wednesday hearing encouraged the subcommittee to closely monitor the CFPB's RESPA/TILA rulemaking and other agency efforts.

Warning that an overabundance of disclosures can create issues for borrowers and lenders alike, the CUNA statement also urged the CFPB to "provide consumers with efficient and complete disclosures."

CUNA also suggested the CFPB allow lenders to use model forms for their TILA disclosures. The use of model forms would still ensure lender compliance with TILA, but would grant lenders a degree of flexibility at the same time, CUNA said. Lenders could still be required to use standardized RESPA forms, CUNA added.

Allowing lenders to use a mixture of model forms and standardized forms for their mortgage disclosures would prevent unscrupulous lenders from hitting borrowers with so-called "bait and switch" schemes, and contribute overall to better consumer protection, CUNA said.

CUNA also suggested the CFPB could remove or revise portions of the developing disclosure that would require lenders to provide:

  • The total amount of interest that a consumer will pay over the life of the loan as a percentage of the principal of the loan; and
  • The approximate amount of the wholesale rate of funds in connection with the loan.
CUNA questioned whether either of these disclosures would provide any benefit to consumers.

The comments of some hearing witnesses echoed other CUNA concerns, as they questioned the CFPB's plan to require integrated settlement disclosures to be provided to home buyers and sellers three business days before closing. CUNA said it is difficult for credit union lenders to coordinate with title companies and others 24 hours in advance of a real estate closing, and adding an additional 48 hours to this equation could create problems for credit unions and borrowers.

Witnesses also called on the CFPB to provide a "reasonable" implementation period to allow financial institutions to adjust to the new disclosures once they are issued.

Inside Washington (06/20/2012)

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  • WASHINGTON (6/21/12)--JP Morgan Chase's recent $2 billion loss fueled the political arguments of both Democrats and Republicans at a House Financial Services Committee hearing held this week. While Democrats argued that the loss demonstrated the need for stronger oversight, and the need for greater funding for regulators such as the Commodity Futures Trading Commission, Republicans noted that the loss was merely an example of how financial markets operate (American Banker, June 20). Rep. Ed Royce (R-Calif.) said capital "is the ultimate buffer" against unforeseen business losses, and Republicans said JP Morgan's reserves provide a better defense against systemic issues than regulations could. However, Rep. Maxine Waters (D-Calif.) said the issue is not JP Morgan's one-time loss, but potentially bigger losses that could occur down the road. Lawmakers from both sides of the aisle criticized regulatory responses to the JP Morgan crisis, however, noting that they did not hear about the trading issues, which originated at the firm's London office, until they were reported in the press. JP Morgan CEO Jamie Dimon was also questioned during the hearing, with legislators asking if his firm is too large and too complex to be effectively managed…
  • WASHINGTON (6/21/12)--The U.S. Treasury this week informed 200 banks that pools of their securities that are currently held in the agency's Troubled Asset Relief Program (TARP) would soon be auctioned off (American Banker, June 21). The auctions are scheduled to begin this fall. The Treasury in a letter to the banks said the upcoming auctions would "help support the objectives of winding down TARP, recovering taxpayer dollars, and helping community banks attract private capital to replace temporary government support." The 200 banks that are scheduled to take part in the auction represent $2 billion of the $11 billion the Treasury has invested in TARP's Capital Purchase Program…

Survey on compliance costs shouldnt add to them CUNA

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WASHINGTON (6/21/12)--The Consumer Financial Protection Bureau (CFPB) should "fully understand and minimize the potential implementation and ongoing compliance costs and unintended consequences on credit unions from its potential new regulations,'' the Credit Union National Associaiton (CUNA) wrote in a letter to the agency.  CUNA Regulatory Counsel Dennis Tsang recommended that the agency "develop limited, targeted questions'' when the bureau begins collecting information about compliance costs and other effects of regulations.

CUNA has been working diligently since the CFPB began operations last year to ensure that credit unions, which already face substantial regulatory burdens, don't have to deal with additional unnecessary time and financial costs.

The CFPB sought input as part of its rulemaking process. The bureau has direct supervisory authority over financial institutions with assets of more than $10 billion. Other credit unions must comply with the CFPB's rules, but the enforcement is done by the NCUA or their state regulator.

CUNA also suggested that sampling institutions that are representative of the markets affected by the CFPB rulemakings can be more efficient than broader inquiries.

"The agency should utilize proper statistical and research methods to ensure a representative sample for each affected market to properly measure compliance costs," CUNA wrote. "Other institutions that are not part of the sample should have an option to submit their information after reviewing the information collection materials."

Use the resource link to access CUNA full comments.

CUNA witness to seek SBA extensions reg relief

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WASHINGTON (6/21/12)--Congress should reauthorize the U.S. Small Business Administration's (SBA) 504 refinance loan program and the SBA 504 First Mortgage Lien Pool (FMLP) program to enable credit unions to continue helping small business grow, Redwood CU President/CEO Brett Martinez, a member of the Credit Union National Association (CUNA) board, is expected to tell a House subcommittee today.

Martinez's 220,000-member, $2 billion-asset Santa Rosa, Calif.-based credit union is the largest SBA credit union lender in the country by loan volume. He plans to tell the House Small Business subcommittee investigations, oversight and regulations that SBA guaranteed loans are important for borrowers who otherwise would not be able to get a conventional business loan, but add they are complicated to make.'

He also plans to tell lawmakers that despite the statutory cap on member business loans--12.25% of assets-- at the end of 2011, credit unions had $40 billion in business loans outstanding, making it the fastest growing type of credit union lending over the last several years and representing approximately 6% of the depository institution market. CUNA supports legislation that would increase the cap to 27.5% of assets to enable credit unions to do more to support small businesses and boost the economy.

In addition, he will reiterate CUNA's support for the SBA's adaption of a single electronic lender application which will reduce the paperwork burden at credit unions and should result in increased lender participation. SBA should also develop an optional credit scoring methodology to be used by SBA lender partners in the underwriting process in an effort to lower lenders' costs of delivering capital to borrowers.

NCUA postpones action on CUSO rule

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ALEXANDRIA, Va. (6/21/12)--The National Credit Union Administration (NCUA) yesterday cancelled its scheduled June open board meeting, and this decision will give the Credit Union National Association (CUNA) the chance to continue raising concerns and priorities regarding the NCUA's pending final credit union service organization (CUSO) rule with NCUA board members and staff, CUNA President/CEO Bill Cheney said.

A CUSO final rule was the lone item on today's open meeting agenda. Under a proposed version of the CUSO rule, CUSOs and their subsidiaries would be required to directly file their financial statements with the NCUA, and to forward those reports to state supervisors. The NCUA currently has the authority to inspect the financials and records of some CUSOs, but the majority of financial information on CUSOs is provided by natural person credit unions that obtain services from the CUSOs.

The NCUA has argued that enhancing the monitoring of CUSOs would protect consumers, credit unions and the National Credit Union Share Insurance Fund (NCUSIF). However, CUNA has said that while some CUSOs have had issues, CUSOs as a whole do not pose a systemic risk to the credit union system or overall concerns to the NCUSIF.

"CUNA will continue to press for minimal regulation that will not impose unnecessary constraints on sound and beneficial CUSO operations," Cheney said.

The NCUA's closed board meeting is still scheduled. Four supervisory activities and one personnell matter are on the closed board meeting agenda, according to the NCUA.

NEW NCUA cancels June meeting postpones action on CUSO rule

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ALEXANDRIA, Va. (UPDATED: 1:30 P.M. ET, 6/20/12)--The National Credit Union Administration (NCUA) today cancelled its scheduled June open board meeting, and this decision will give the Credit Union National Association (CUNA) the chance to continue raising concerns and priorities regarding the NCUA's pending final credit union service organization (CUSO) rule with NCUA board members and staff, CUNA President/CEO Bill Cheney said.

A CUSO final rule was the lone item on Thursday's open meeting agenda. Under a proposed version of the CUSO rule, CUSOs and their subsidiaries would be required to directly file their financial statements with the NCUA, and to forward those reports to state supervisors. The NCUA currently has the authority to inspect the financials and records of some CUSOs, but the majority of financial information on CUSOs is provided by natural person credit unions that obtain services from the CUSOs.

The NCUA has argued that enhancing the monitoring of CUSOs would protect consumers, credit unions and the National Credit Union Share Insurance Fund (NCUSIF). However, CUNA has said that while some CUSOs have had issues, CUSOs as a whole do not pose a systemic risk to the credit union system or overall concerns to the NCUSIF.

"CUNA will continue to press for minimal regulation that will not impose unnecessary constraints on sound and beneficial CUSO operations," Cheney said.

The NCUA's closed board meeting will still be held. Four supervisory activities and one personnell matter will be addressed at that meeting, the NCUA said.

Inside Washington (06/19/2012)

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  • WASHINGTON (6/20/12)—A 12-member Northwest Credit Union Association (NWCUA) group brought the credit union message to Capitol Hill earlier this month. The group, which included credit union staff from Washington and Oregon, "got around the Hill efficiently and effectively as our meetings progressed," NWCUA Vice President of Legislative Advocacy Jennifer Wagner said. The Cascadian crew met with Consumer Financial Protection Bureau and National Credit Union Administration (NCUA) staff, including NCUA Chairman Debbie Matz. During meetings with eight members of Congress, the group asked their legislators to support increasing the credit union member business lending cap and allowing credit unions greater authority to raise supplemental capital. The credit union representatives also sought congressional support for legislation that would change current ATM disclosure requirements. Capitol Hill hikes are scheduled from June until October, and the Missouri, Montana, Ohio and Texas leagues are scheduled to come to Washington next week…
  • WASHINGTON (6/20/12)—The Federal Housing Administration late last week rescinded a policy that would have harmed prospective mortgage borrowers with $1000 or more in disputed credit, or whose credit accounts were referred to a collections agency by their lenders (American Banker June 19). The FHA rule was scheduled to become effective on July 1 and would have required borrowers to pay their debts in full, or make at least three months' worth of payments, before they could qualify for an FHA mortgage loan. The FHA plans to revise the policy, FHA spokesman Lemar Wooley said…
  • WASHINGTON (6/20/12)—The Systemic Risk Council, a private sector, volunteer group led by former Federal Deposit Insurance Corp. chair Sheila Bair, held its first meeting on Monday (American Banker June 19). The group is tasked with monitoring and encouraging regulatory reform of U.S. capital markets, and will mainly focus on systemic risk. Bair on Monday said today's economy "arguably faces even greater potential problems than it did in the run-up to the subprime crisis," adding that now "is not the time for complacency." Council members added that the government is not effectively using the regulatory tools it was given by the Dodd-Frank Act. "Tools are only useful to the extent they are actively used, and used in the right way," Bair said. She said she is concerned that "little has been done to address systemic issues … throughout the financial system." Overall, many regulatory agencies suffer from insufficient leadership, Bair said. The Systemic Risk Council comprises experts in investments, capital markets and securities regulation, including senior adviser Paul Volcker, former chair of the Federal Reserve. Bair said the group would be "speaking out more publicly, having more meetings, knocking more heads" going forward…
  • WASHINGTON (6/20/12)—The Consumer Financial Protection Bureau (CFPB) on Tuesday announced several staff changes, including the addition of former National Federation of Community Development Credit Unions President/CEO Clifford Rosenthal. Rosenthal, who led the Federation for more than 30 years, will serve as the CFPB's assistant director of financial empowerment. "As the CFPB continues moving forward with its important work, we are leveraging the collective expertise of our dedicated senior staff to better serve consumers and fulfill the CFPB's mission of making consumer financial markets more fair, transparent, and competitive," CFPB Director Richard Cordray said...

CUNA in iThe Hilli ATM disclosure issues harm CU members

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WASHINGTON (6/20/12)--Current ATM disclosure requirements are creating issues for credit unions, and preventing those credit unions from more fully serving their members, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said in The Hill.

Portions of Regulation E require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Fee notices are also displayed on the ATM screen.

Donovan estimated that credit unions are spending around $2,000 per ATM machine to comply with the physical ATM notice requirement. "If a credit union is spending — as in this case — $2,000 to comply with a regulatory requirement that doesn't benefit the consumer, that comes as a cost to them. We can't use that $2,000 to make a loan to them," Donovan added.

Credit unions and others have also been subject to frivolous lawsuits as a result of the dual-disclosure requirement. CUNA has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb.

CUNA recently estimated that the total number of these lawsuits could be in the hundreds, and many credit unions are settling the suits to avoid the cost of litigation.

Legislation that would help credit unions and others by easing these ATM regulations is scheduled to be discussed during a June 27 House Financial Services Committee markup session. The ATM bill, known as H.R. 4367, was introduced by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) in April. It has 106 cosponsors.

However, as noted in The Hill, Consumers Union, Consumer Action and the U.S. Public Interest Research Group (PIRG) have urged members of Congress to oppose ATM disclosure relief legislation. The consumer groups are concerned that consumers could engage in an ATM transaction without knowing the full extent of fees that could be charged if the disclosure placards are removed. They have also suggested that the ATM issue should be addressed by regulators, not legislators.

CUNA's intention has not been to reduce disclosure or consumer information, but rather to ensure that credit unions are able to efficiently use the resources of the credit union to the benefit of the member, Donovan said earlier this month. CUNA has also urged the Consumer Financial Protection Bureau to use its own authority under the Dodd-Frank Wall Street Reform Act and the Electronic Fund Transfer Act to amend Regulation E and eliminate the requirement for on-machine ATM fee disclosure notices.

CFPB 137 card complaints live 17000 in backlog

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WASHINGTON (6/20/12)--While the Consumer Financial Protection Bureau's (CFPB) consumer credit card complaint database, which went live on Tuesday, features 137 separate credit card complaints, none of the issues reported are tied to credit union cards.

The CFPB's database gives details on the issue that prompted a consumer's credit card complaint, the zip code of the consumer that made the complaint, and the company against which the complaint was made. Information on how the issue raised was resolved, and whether it was resolved in a satisfactory fashion, is also included.

The database does not include those credit card complaints which the CFPB has received, and referred to other prudential regulators.

The agency said it will update the database as new complaints are received. Overall, the CFPB said it has received around 17,000 complaints in the past year, and these complaints should be added into the new online database later this year. The CFPB has only collected, and passed on to credit card issuers, complaints related to financial institutions with more than $10 billion in assets.

According to 2010 Federal Reserve estimates, nearly 610 million credit cards are held by U.S. consumers, and the average credit card user maintains 3.5 credit accounts.

Billing disputes have been the most common complaint lodged with the agency, and the CFPB said that 84% of the credit card complaints filed have been forwarded on to consumers' respective credit card companies. Card companies have responded to 2,000 of the complaints by compensating cardholders financially, and the CFPB said $25 payments were the most common form of financial relief given by card companies. The median amount of relief given was $130.

The agency on Tuesday said it is also considering creating similar databases to compile and present complaints regarding the other consumer financial products it regulates, including mortgages, private student loans, and bank products. The CFPB will accept public comment on this possibility until July 19, and similar databases could go live by the end of this year.

The Credit Union National Association will file a comment letter strongly recommending the CFPB's consumer complaint process be as tailored as possible to avoid groundless consumer complaints.

FHFA seeks to improve Fannie Freddie exam system

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WASHINGTON (6/20/12)—The Federal Housing Finance Agency (FHFA) has asked for public comment on proposed changes to how examiners assess the financial well-being of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and various Federal Home Loan Banks (FHLBs).

Under the proposed examination rating system, Fannie Mae, Freddie Mac, the Federal Home Loan Banks and their respective finance offices would be judged on their capital, asset quality, management, earnings, liquidity, sensitivity to market risk, and operational risk. The GSEs and FHLBs would be assigned a rating of one to five for each of these categories, with a score of one indicating little to no risk and a score of five indicating a high risk.

A composite rating would be created from these seven individual rating categories. The FHFA said, however, that the relative importance of each rating component "would be determined on a case-by-case basis."

The FHFA said the new system would be adopted on Jan. 1, 2013, if a final version is approved.

Comments on the proposed rating framework will be accepted until July 19.

The FHFA currently uses the Federal Home Loan Bank's examination framework.

CFPB credit card complaint database unveiled

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WASHINGTON (6/19/12)—A comprehensive database of consumer credit card complaints is being unveiled today by the Consumer Financial Protection Bureau (CFPB).

The database will be used to detail an issue that prompted a consumer complaint, the zip code of the consumer that made the complaint, and the company against which the complaint was made. Information on how the complaint was resolved, and whether it was resolved in a satisfactory fashion, is also included.

"Each and every time we hear from American consumers about their troublesome transactions with financial products, it gives us important insight," CFPB Director Richard Cordray said. "By making our data publicly available, initially in the area of credit cards, we hope to improve the transparency and efficiency of this essential consumer market," he added.

The bureau said it will update the database as it receives complaints. Users can search through the database, and reorganize the complaints by their type, issuer, location and date. Complaint data can also be downloaded by site users, the CFPB said.

The agency also released some details of the consumer complaints it has gathered on mortgages, private student loans, and bank products, as of June 1.

Inside Washington (06/18/2012)

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WASHINGTON (6/19/12)--The U.S. Small Business Administration (SBA) on Monday released a revised, more user-friendly version of its electronic application for disaster recovery assistance loans. Under the new online loan application process, users will be provided with simple, electronic versions of home and business loan applications. Under the previous process, users were guided through the application process based on their answers to a series of questions. "Our goal is to provide support for those rebuilding after a disaster, and we wanted to make the process more user-friendly," SBA Administrator Karen Mills said. The application revisions will make the first steps toward disaster recovery "more convenient," she added. Homeowners and renters who suffered damages to their homes and personal property following a declared disaster can apply for help from the SBA…

WASHINGTON (6/19/12)—The FHFA in a release said it has directed government-sponsored enterprises Fannie Mae and Freddie Mac to avoid purchasing mortgages where Property Assessed Clean Energy (PACE) program financing, with priority liens, have been attached to the underlying property. "Such financing moves ahead of the pre-existing first mortgage in lien priority, and thereby subordinates Fannie Mae and Freddie Mac security interests in the property," the release said. The PACE Program allows local governments to fund energy efficiency initiatives through bond initiatives. The bonds are then paid off by the local homeowners and landowners that benefit from the energy efficiency upgrade, according to the U.S. Department of Energy. PACE programs can, however, pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors, the FHFA has previously said. The National Credit Union Administration in recent years has encouraged credit union lenders to understand the implications of PACE loan programs which could potentially usurp a lenders senior lien position on a mortgage, undermine the underwriting decisions made by the lender at the time of mortgage origination, and bypass consumer protections required prior to the extension of credit…

WASHINGTON (6/19/12)—As a vote on agricultural policy legislation approaches, bankers have stepped into the debate, encouraging lawmakers not to weaken the federal crop insurance program (American Banker June 18). A number of legislators have proposed bills that would reduce or limit government subsidies paid to farmers, which can total a combined $7 billion in government spending per year. Bankers have claimed many farmers would not be able to afford their crop insurance premiums without government-provided payment assistance. A lack of adequate insurance could result in unpaid loans, if crops are damaged before they can be harvested…

Financial services appropriations to take next step in House

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WASHINGTON (6/19/12)—The U.S. House version of financial services appropriations for the 2013 fiscal year, which would address vital credit union programs and other financial services priorities, is scheduled to be discussed in a House Appropriations Committee markup session this week.

The House version of 2013 financial services and general government appropriations legislation was passed by the House Appropriations subcommittee on financial services earlier this month.

Under that bill, the National Credit Union Administration's (NCUA) Community Development Revolving Loan Fund (CDRLF) program, which provides loans and technical assistance to federal and state credit unions that are designated as low-income credit unions, would receive $500,000 in funding. The House bill would also provide $221 million in funding for the U.S. Treasury's Community Development Financial Institutions (CDFI) fund. The CDFI Fund helps credit unions and other financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit.

The NCUA's Central Liquidity Facility (CLF) would not be changed by the House appropriations legislation. That fund is currently authorized by the Federal Credit Union Act to lend up to 12 times its paid-in capital.

The CLF would also remain unchanged under the Senate version of financial services appropriations legislation, which was approved by the full Senate Appropriations Committee last week.

The Senate bill would also provide $233 million in CDFI Fund backing and $1.19 million in CDRLF funds to the NCUA. The Senate appropriations legislation has been passed on to the full Senate.

Final versions of the House and Senate appropriations bills will be subject to a reconciliation process before they are moved on for final approval by President Barack Obama.

The Obama administration requested $1.19 million in funds for the 2013 edition of the CDRLF and $221 million for the CDFI Fund earlier this year. The administration also requested that the CLF maintain its full authority.

Mayors join broad coalition of MBL support

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WASHINGTON (6/19/12)--The U.S. Conference of Mayors has encouraged members of the U.S. Senate to support "efforts to strengthen small businesses and local economies" by voting in favor of the Credit Union Small Business Jobs Act (S. 2231), which would increase the credit union member business lending (MBL) cap.

A resolution supporting S. 2231 was offered by Madison, Wisc. Mayor Paul Soglin, Seattle, Wash. Mayor Mike McGinn, Portland, Ore. Mayor Sam Adams and Pembroke Pines, Fla. Mayor Frank Ortis, and was approved during the conference. The mayoral conference was held in Orlando, Fla., between June 13 and 16.

S. 2231, which could come up for a Senate vote at any time, would increase the MBL cap to 27.5% of assets. The Credit Union National Association (CUNA) has estimated that lifting the MBL cap to 27.5% of assets, from 12.25%,  would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers. S. 2231 currently has 22 Senate co-sponsors.

The mayors' resolution noted a recent joint Small Business Majority, Main Street Alliance and American Sustainable Business Council report that found that 90% of small businesses are having difficulty accessing credit, and said S. 2231 would allow credit unions to partner with local businesses to create jobs and strengthen neighborhoods and cities.

The resolution highlighted that the MBL cap adjustment, and the additional capital provided to small business owners, would come at no cost to taxpayers.

The "extraordinarily broad range of support" for S. 2231, which encompasses conservative think tanks as well as progressive community and minority advocacy organizations, was also noted in the resolution.

CUNA to testify on small biz lending Thursday

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WASHINGTON (6/19/12)—Brett Martinez, Credit Union National Association (CUNA) board member and president/CEO of Santa Rosa, California's Redwood CU, will discuss the regulatory burdens faced by credit unions and credit union involvement in some of the U.S. Small Business Administration's (SBA) financial assistance programs in a Thursday House Small Business investigations, oversight and regulation subcommittee hearing.

Martinez is also expected to address the benefits that increasing the credit union member business lending (MBL) cap to 27.5% of assets could provide to small businesses and the economy in general. CUNA has estimated that increasing the MBL cap, which currently stands at 12.25% of total assets, would inject $13 billion in new funds into the economy and create 140,000 new jobs, at no cost to taxpayers.

The hearing, entitled "Small Business Lending: Perspectives from the Private Sector," is scheduled to begin at 10:00 a.m. ET. The hearing will focus on the regulatory burdens faced by small business lenders, and how SBA loan program management could be improved, the subcommittee said in a release.

Robert Marquette, president/CEO of Members 1st FCU, Mechanicsburg, Penn., and banking industry representatives are also scheduled to testify during the hearing.

Eligible credit unions are currently able to participate in the SBA's Small Loan Advantage and Community Advantage programs, which are aimed at increasing the number of lower-dollar SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities.

The SBA's 7(a) government-guaranteed loans can be used for variety of general business purposes, including working capital and purchases of equipment and real estate. The guaranteed portion of SBA loans does not count toward the credit union MBL cap.

CUNA in past testimony has encouraged the SBA to simplify some 7(a) loan documentation and processing requirements.

Longer NFIP extension could soon be debated

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WASHINGTON (6/19/12)—Debate over the National Flood Insurance Program (NFIP), and how long to extend that program, will be one of many items credit unions should keep an eye on in Congress this week.

The U.S. Senate is expected to take up S. 1940, which would extend the NFIP until Sept. 30, 2013, after debate on the Agriculture Reform, Food, and Jobs Act of 2012 (S. 3240) is complete. However, legislation that could extend the NFIP for five years is also reportedly being discussed in the Senate.

The NFIP is set to expire on July 31, and Congress will need to move on legislation before then to prevent the NFIP from lapsing. The NFIP lapsed three times in 2010, and the Credit Union National Association (CUNA) has noted that lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

In the U.S. House, credit unions will want to watch for a Thursday House Small Business investigations, oversight and regulation subcommittee hearing on small business lending. Redwood CU, Santa Rosa, California, President/CEO and CUNA Board Member Brett Martinez is scheduled to testify during the hearing. (See related News Now story: CUNA to testify on small biz lending Thursday)

CUNA will also submit a statement for the record ahead of a Wednesday House Financial Services insurance, housing and community opportunity subcommittee hearing on the Consumer Financial Protection Bureau's recent mortgage loan disclosure work.

The House Financial Services Committee has also scheduled a Tuesday hearing on J.P. Morgan Chase's recent $2 billion trading loss, and a House Financial Services consumer credit subcommittee hearing on money service business regulations is scheduled for Thursday morning.

The House and Senate are both expected to remain in session until a one-week recess begins on July 2.

Cheney addresses ACUC CU issues on iCUbroadcast.comi

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WASHINGTON (6/18/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney updated viewers on the latest credit union legislative priorities, and previewed this week's America's Credit Union Conference (ACUC), in a recent CUbroadcast.com interview.

Increasing the credit union member business lending (MBL) cap remains a central issue, and Cheney in the interview called on credit unions to continue to aid the MBL fight. Cheney said credit unions should encourage their small-business-owning members to contact their senators on MBL legislation. "Everybody can do that," he said.



Regulatory burdens also continue to loom large for credit unions, he said, and CUNA is working to address these issues. Expanding capital options for credit unions has been another recent focus, and CUNA continues to watch for any legislation that could impact credit unions' non-profit tax status, Cheney added.

The CUNA leader also addressed the differences between the ACUC and CUNA's yearly Governmental Affairs Conference. While the GAC is mainly a political event, the ACUC is centered on helping credit unions improve their own operations and practices, and strengthening the movement.

America's Credit Union Conference (ACUC) kicked off Sunday afternoon at the San Diego Convention Center. Nearly 1,300 credit union decision makers are scheduled to attend this year's conference, which ends on Wednesday. Up-to-the-minute coverage of the ACUC will be provided by CUNA News Now and CU Magazine staff this week.

LICUs are national trendsetters NCUAs Matz says

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ATLANTA, Ga. (6/18/12)--Low-income credit unions (LICUs) are national trendsetters that are leading other lenders in loan growth while simultaneously strengthening their safety and soundness, National Credit Union Administration (NCUA) Chairman Debbie Matz said in a Friday speech before the National Federation of Community Development Credit Unions' annual conference.

Matz in her speech said that LICUs, which serve 6.6 million Americans, are lending more than other types of financial institutions, having expanded their loans by $11 billion between December 2007 and March 2012. This represented a 57.6% increase. Loans made by banks and thrifts declined, overall, by 6.3% during that same period, Matz noted.

LICU lending has increased steadily over the last four quarters, increasing by 4.6% in the first quarter of 2012, Matz added. Loan balances at banks and thrifts declined by 0.8% during the same time, she said.

Many of the key financial indicators for LICUs have also improved recently, and they posted a net worth ratio of 10.25% in the first quarter of 2012. Return on average assets has nearly doubled, charge-offs have fallen by around 30%, and delinquencies have held steady since late 2009, she added.

"The collective success of low-income credit unions demonstrates that credit unions can do well while serving people of modest means," Matz said.

She also highlighted NCUA's work to buttress the efforts of LICUs, including providing more strategic planning consulting, offering a wider range of assistance, revamping loan and grant programs, and extending the reach of the agency's Office of Small Credit Union Initiatives (OSCUI).

The OSCUI also supports small credit unions by offering grants and loans to eligible credit unions, Matz said.

The 1,119 designated low-income credit unions can still apply for up to $25,000 in grants and $300,000 in loans to help support their financial literacy, staff and board member training, internship, and tax prep assistance efforts through the agency's Community Development Revolving Loan Fund (CDRLF).

The NCUA will continue to accept CDRLF applications until June 29. A total of $1.3 million in funds is available for grants this year. Eligible credit union loans will be disbursed from a pool of $11 million.

Remittance more highlight Tuesday CUNA conference

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WASHINGTON (6/18/12)--Frequently asked questions regarding remittance regulations will be among the topics covered in a June 19 Pressing Compliance Issues audio conference.

Credit Union National Association (CUNA) Director of Compliance Information Valerie Moss covered one such remittance question in a recent CompBlog post.

In her post, Moss advised that credit unions will not be considered to be acting as remittance transfer providers when they perform activities as an "agent" on behalf of a remittance transfer provider, such as MoneyGram.

Regulation E, Electronic Fund Transfers, defines the term "agent" as "an agent, authorized delegate, or person affiliated with a remittance transfer provider, as defined under state or other applicable law, when such agent, authorized delegate, or affiliate acts for that remittance transfer provider," Moss explained.

Thus, remittance transfer providers are responsible for the acts of their agents, and will be liable for any rule violations when the agent is acting for the provider, she added.

CUNA Senior Vice President for Compliance Kathy Thompson, Senior Compliance Counsel Mike McLain and Federal Compliance Counsel Colleen Kelly will join Moss to lead this week's hour-and-a-half long CUNA compliance audio conference, which is scheduled to begin at 2 p.m. ET on Tuesday.

The audio conference will also address:

  • The National Credit Union Administration's examination questionnaire for the new interest rate risk regulation;
  • New U.S. Internal Revenue Service nonresident alien reporting rules;
  • New Bank Secrecy Act requirements; and
  • Other compliance issues.
Registration is still open for the conference. To register, use the resource link.

Strong CU support will continue CDFI says

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WASHINGTON (6/18/12)--Credit unions demonstrate that America "can be stronger when we include those that have been excluded, and when we seek to build institutions that are both sustainable and just," Donna Gambrell, director of the U.S. Treasury's Community Development Financial Institutions (CDFI) Fund, said Friday.

The CDFI Fund's support for community development credit unions has been strong and is getting stronger, she added in her speech before the National Federation of Community Development Credit Unions' annual conference in Atlanta, Ga.

This support was demonstrated by the 100% increase in CDFI funds awarded to eligible credit unions between 2010 and 2011, she said. A total of 25 credit unions received a combined $25.6 million in financial and technical assistance awards in the 2011 funding round, more than double the $12 million total that was awarded in 2010, Gambrell noted. The number of CDFI-certified credit unions also continues to grow, with the 221 certified credit unions accounting for 22.7% of all registered CDFIs as of March 31. (See related News Now story: CU Strategic Planning led increase in CDFI grants won)

A total of 403 credit unions, banks, loan funds, venture capital funds, thrifts and holding companies have requested a combined $395.7 million in CDFI Fund awards for the 2012 round of the fund. However, only $123 million in funds will be disbursed this year.

Gambrell said awards for the 2012 program will be announced by early August. The 2013 round of the CDFI Fund will open this fall.

Funding for the 2013 CDFI Fund is still to be determined. The Senate Appropriations Committee last week approved $233 million in CDFI Fund spending last week as part of a larger financial services appropriations bill. That legislation has been passed on to the U.S. Senate.

However, under a House financial services appropriations bill, CDFI Fund spending would remain at 2012's total of $221 million.

The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community. CDFI fund distributions are merit-based.

Inside Washington (06/15/2012)

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  • WASHINGTON (6/18/12)--Fannie Mae and Freddie Mac have completed more than 2.3 million foreclosure prevention actions since the start of their conservatorship in 2008, including 1.1 million permanent loan modifications, the Federal Housing Finance Agency (FHFA) announced Friday. These actions, designed to help borrowers stay in their homes, are detailed in the FHFA's first quarter 2012 Foreclosure Prevention Report, also known as the Federal Property Manager's Report. The report also indicates that nine months after modification, less than 15% of loans modified in the second quarter of 2011 had missed two or more payments. Half of all borrowers who received loan modifications in the first quarter had their monthly payments reduced by more than 30%, and one-third included principal forbearance. The report features an interactive Borrower Assistance Map for Fannie Mae-and Freddie Mac-owned mortgages, with information as of March 31 on delinquencies, foreclosure prevention activities, Real Estate Owned (REO) properties and refinances in each state …
  • WASHINGTON (6/18/12)--The Senate Appropriations Committee Thursday approved a $308 million budget for the Commodity Futures Trading Commission (CFTC). The funding bill was approved along party lines in a 16-14 vote. The spending package is about a $103 million increase from the CFTC's current $205 million budget. Last week the House Appropriations Committee approved a $180.4 million budget for the CFTC (American Banker June 15). The Senate appropriations bill also includes $1.57 billion in funding for the Securities and Exchange Commission. That figure represents $245 million increase from the agency's current budget, and $200 million more than the House Appropriations Committee approved. Last week, CFTC Chairman Gary Gensler said the agency needs the additional funding to oversee the swaps market, which is eight times larger than the futures market it has traditionally overseen. "At this funding level, the CFTC will have sufficient cops on the beat to promote swap market transparency, to lower risk to the financial system, and to help protect the American people from future bailouts of the financial industry," Gensler said …

NCUA hits exam issues at Fla. Listening Session

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ORLANDO, Fla. (6/15/12)--It was another productive meeting, Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said of the National Credit Union Administration (NCUA) Listening Session she attended here this week, with examination issues and a possible revised definition of "small" credit union, in particular, front and center.

With about 80 credit unions in attendance, NCUA's Director of Examination and Insurance Larry Fazio underscored that the agency is working to develop a productive examination environment for credit unions and examiners.

Fazio urged credit unions to communicate regularly with their examiners and also to move those communications up the line to their supervisory examiner.

NCUA Chairman Debbie Matz, adding to that advice, suggested a credit union go even further when needed. She told the Listening Session participants that credit unions should move up the chain of command until they successfully resolve an issue. Improprieties, she added, should be referred to NCUA's Inspector General.

It was notable, said Dunn Thursday, that some credit union participants said they have recognized improvements with their examiners.

As reported previously, the NCUA is rewriting its supervisory policy manual for examiners and hopes to have that out in the field by July. The manual is intended to promote consistency among the regions on supervisory issues. (Examinations and the new examiners' manual are among topics discussed in the just-released June NCUA Monthly Report. See today's Inside Washington section for the link.)

On another topic, the NCUA chairman noted that the agency board may soon consider adopting a revised definition for what constitutes a small credit union. She said the threshold may be raised above the current $10 million-asset mark.

Matz also noted that the NCUA will be sending information to about 1,100 credit unions in July indicating that they qualify for low-income designation, thereby qualifying them to fall under rules that allow access to supplemental capital and an exemption from the current 12.25% member business lending cap.

There are two remaining of the six Listening Sessions scheduled by the NCUA this year. They are:

· July 10 in San Diego, Calif.; and

· July 31 in Denver, Colo.

Registration is limited to the first 150 reservations. See resource link for more information.

CFPBs next target Elder financial abuse

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WASHINGTON (6/15/12)--The Consumer Financial Protection Bureau (CFPB) has asked for public comment on any fraudulent or deceptive practices that target elderly Americans and their families, and for information on financial products, services and literacy efforts that help combat these types of scams.

"We want to know what programs exist and how effective they are," the CFPB said in a Thursday release.

The agency said comments could focus on what resources are provided to help seniors vet any financial advisors and planners they may hire. Information on how financial education, financial counseling and management programs can be tailored to meet the needs of senior citizens and those that care for them has also been requested by the CFPB.

The CFPB will accept comments for 60 days after its request is published in the Federal Register, which will likely bring the comment period to a close around mid-August.

Skip Humphrey, head of the CFPB's Office of Older Americans, noted that an estimated $2.9 billion was stolen from financially exploited senior citizens in 2010. Reported instances of financial theft from seniors grew by 12% between 2008 and 2010, he said.

In a separate release, the CFPB said older Americans can protect themselves from some forms of financial abuse by granting power of attorney to a trusted family member. However, the CFPB cautioned, seniors should be careful when they decide to cede that type of power.

Potential signs of elder financial abuse, the Financial Crimes Enforcement Network (FinCEN) said in warnings, can include large ATM withdrawals, debit transactions that are not consistent with a customer or member's normal activities, and sudden non-sufficient fund activity. Credit unions and other financial service providers should also be aware of caregivers that take a sudden interest in a senior citizen's financial activities, caregivers that attempt to speak for the senior citizen, or caregivers that refuse to leave a senior citizen's side when they are discussing financial matters.

FinCEN in 2011 reported a sharp increase in the number of financial institutions that filed Suspicious Activity Reports (SARs) related to elder financial abuse.

The Maine Credit Union League and the Northwest Credit Union Association are among those that have supported elderly financial abuse prevention legislation in their respective states, and more than 20 states now have laws requiring financial institutions to report elder abuse.

Maryland became the latest to add such laws to its books last month. The Maryland law will require credit unions and other financial institutions to report any suspicions of elder abuse to Adult Protective Services or local law enforcement within 24 hours by phone, and to later follow up in writing. Financial institutions that fail to do so would face a penalty of as much as $5,000. The law is scheduled to go into effect in October.

Credit unions can also help prevent financial exploitation of the elderly by participating in the U.S. Treasury's GoDirect federal benefit direct deposit program. That program helps seniors avoid potential instances of fraud by electronically depositing federal benefit payments into user accounts. The Credit Union National Association is a GoDirect partner.

CUSO rule is focus of NCUA June agenda

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ALEXANDRIA, Va. (6/15/12)--Proposed credit union service organization (CUSO) regulatory changes drew a substantial number of comments from credit unions when they were released last year, and a final version of the CUSO changes will be the lone item on the agenda when the National Credit Union Administration (NCUA) holds its open board meeting on June 21.

Under the proposal, CUSOs and their subsidiaries would be required to directly file their financial statements with the NCUA, and to forward those reports to state supervisors.

The NCUA currently has the authority to inspect the financials and records of some CUSOs, but the majority of financial information on CUSOs is provided by natural person credit unions that obtain services from the CUSOs.

The agency has noted that this is an inefficient system, and said enhancing the monitoring of CUSOs would protect consumers, credit unions and the National Credit Union Share Insurance Fund (NCUSIF).

The Credit Union National Association (CUNA) filed an extensive comment letter on the proposal, noting that while some CUSOs have had issues, CUSOs as a whole do not pose a systemic risk to the credit union system or overall concerns to the NCUSIF.

CUNA has asked the agency to substantially modify the CUSO proposal before making it final, and CUNA regulatory staff and President/CEO Bill Cheney have met many times with the NCUA to discuss this issue.

CUNA has stressed that the CUSO proposal would introduce unnecessary limitations on credit union activities and add to the already large regulatory burdens faced by credit unions.

Overall, CUNA has urged a more targeted approach than that outlined in the CUSO proposal.

NCUA Chairman Debbie Matz in recent Listening Sessions, as her regional conversations with credit unions are called, said the agency has examined ways that the CUSO proposal could be scaled back.

The closed portion of the Thursday NCUA meeting will feature discussion of personnel issues and supervisory activities.

For the full NCUA agenda, use the resource link.

Inside Washington (06/14/2012)

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  • WASHINGTON (6/15/12)--The Consumer Financial Protection Bureau (CFPB) published a notice and request for information in the Federal Register Wednesday asking state agencies, colleges, consumer advocates and lenders to submit data and information on existing private student loan complaints. The agency also sent a letter to attorneys general and state higher education officials to invite their participation. The request came after the CFPB published close to 2,000 comments from individual consumers about their experiences in the private student loan market. The consumer comments published were submitted in response to a request published in the Federal Register last winter, asking for input on a study the CFPB and the Department of Education are conducting on private student loans. Many borrowers reported relying on school financial aid offices for information and guidance on which loan products to use, the CFPB reported. Other borrowers are finding their private student loan debt to be unmanageable or difficult to navigate in the repayment process, the CFPB said …
  • WASHINGTON (6/15/12)—Information on recent board actions, tips for credit union boards seeking new CEOs, and commentary on credit union regulatory issues are all included in this month's edition of The NCUA Report. For the full report, click here…

CUs CUNA dig in on playground renovation

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ST. PETERSBURG, Fla. (6/14/12)--A group of more than 60 volunteers from the Credit Union National Association, the League of Southeastern Credit Unions, Florida credit unions, the Republican National Convention committee, hospital staff, and the National Journal Group all chipped in this week to boost playground renovation efforts at All Children's Hospital in St. Petersburg, Fla.

The "leave behind" project, which is in honor of this summer's 2012 Republican National Convention taking place in nearby Tampa, will retrofit an existing playground with special play equipment for the hospital's young patients.

The volunteers gathered at the hospital to help the playground construction process, planting 1,400 plants and helping build a retaining wall for the playground. Volunteers also assembled toys for the playground.

Click to view larger image Seth (shown seated in a wheelchair) stopped by the playground renovation project at All Children's Hospital, where he has been a patient, on his birthday to cheer on volunteers from CUNA, state credit union leagues, local credit unions, the National Journal, the Republican National Convention, and the hospital, all of whom are involved in the convention "leave-behind" project to benefit the hospital's young patients. (All Children's Hospital photo)
More specialized equipment will be installed by contractors later in the construction process.

Florida House Majority Leader Jim Frishe (R) also visited to take part in the volunteer efforts, which were covered in the St. Pete Times and local Tampa television affiliate ABC Action News.

The Republican National Convention is scheduled to begin on Aug. 27 and end on Aug. 30 in Tampa.

A similar playground project is underway at Levine Children's Hospital in Charlotte, N.C. Charlotte is the location of the 2012 Democratic National Convention. A volunteer day, like the one this week in Tampa, is schedule in Charlotte for June 27.

Since 2000, credit unions have honored the host cities for each national convention with a "leave behind" project that benefits local communities.

The two 2012 projects will cost a combined $600,000, and credit unions nationwide, as well as the Carolinas Credit Union Foundation and the League of Southeastern Credit Unions Foundation have raised funds for the projects.

2011 housing market economy created issues for Fannie Freddie

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WASHINGTON (6/14/12)—Instability in housing markets and the economy in general continued to challenge government-sponsored enterprises Fannie Mae and Freddie Mac in 2011, but all Federal Home Loan Banks (FHLBanks) reported positive annual earnings in that same year, the Federal Housing Finance Agency (FHFA) said in an annual report sent to the U.S. Congress Wednesday.

The FHFA annual report, which is its fourth on the GSEs, noted that Fannie and Freddie were "critical supervisory concerns" for the FHFA in 2011. It said the continued losses at those GSEs were mostly tied to mortgage loans that were originated between 2005 and 2007.

Fannie and Freddie guaranteed around $100 billion in new mortgages per month in 2011, accounting for three of every four mortgages that were originated during that year, the FHFA added.

While FHLBank performance and financial condition remained stable, they "continued to be negatively affected by their exposure to private-label mortgage-backed securities," the report added. FHLBanks ended 2011 with $766.4 billion in total assets, a decline from the $878.3 billion in assets reported in 2010, the FHFA said.

For the full FHFA report, use the resource link.

Long-term NFIP extension back for Senate debate

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WASHINGTON (6/14/12)—Legislation that would extend the National Flood Insurance Program (NFIP) into 2013 could soon be considered in the U.S. Senate.

The bill, S. 1940, was introduced by Senate Banking Committee Chairman Tim Johnson (D-S.D.) late last year, and has passed that committee. In addition to extending the NFIP, it would also grant the Federal Emergency Management Agency (FEMA) the authority to issue up to $20.7 billion in debt obligations for the NFIP, until 2016. However, that funding authorization would be subject to presidential approval under the terms of the bill.

Legislation that extends the NFIP until July 31 was approved in the House and Senate late last month, just before the insurance program expired on May 30. The NFIP has been funded by a series of short-term extensions for some time, and Johnson and others in the Senate and House have repeatedly called for substantial reforms to the program to be made if and when the program is reauthorized for a longer term.

Credit unions, as well as other lenders, cannot write certain mortgages without NFIP coverage, and the Credit Union National Association has noted that lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

The NFIP lapsed three brief times in 2010.

Senate Majority Leader Harry Reid (D-Nev.) and Sen. David Vitter (R-La.) are reportedly working on legislation that would extend the NFIP for five years. Vitter earlier this year introduced his own yearlong NFIP extension, but that bill (S. 2344) has not received a vote.

Sen. Richard Shelby (R-Ala.) last year said that every aspect of the NFIP must undergo significant revision for it to survive and continue on a sustainable path. He suggested the committee examine the relationship between the NFIP and participating insurance companies, with particular attention paid to increasing transparency and accountability. The types of properties that the NFIP is covering should also be examined to ensure that its resources are spent effectively, and privatization of portions of the program should also be considered, Shelby added.

CFPB should review repay rule impact on small biz CUNA

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WASHINGTON (6/14/12)--The Consumer Financial Protection Bureau (CFPB) recently delayed the release of its ability-to-repay mortgage rule until later this year, and the Credit Union National Association (CUNA), the U.S. Chamber of Commerce, and other partners have suggested the agency use the extra time to consider how the mortgage rule could impact small businesses.

Under the still developing ability-to-repay rule, mortgage originators would be required to consider a homebuyers ability to repay their loan before a loan could be offered. The ability-to-repay rule was scheduled to be released as a final version in July, alongside a number of other CFPB mortgage disclosure and rule changes, but the agency delayed its release after new mortgage information came to light. The CFPB has added time to its process to consider new comments from the financial services industry, and CUNA has released a comment call. (See June 8 News Now story: New ability-to-pay comment process may be burdensome: CUNA)

In a joint letter to CFPB Director Richard Cordray, CUNA and several finance- and business-oriented partners suggested the CFPB conduct a Small Business Advocacy Review (SBAR) panel and publish the recommendations of the SBAR panel in conjunction with issuing the final rule. The letter noted that the agency is required to conduct SBAR panels when issuing rules that will significantly impact small businesses. A thorough examination of how the rule would impact small businesses, combined with recommendations gained from the SBAR panel, will help build consensus that will improve the efficacy of the final product, the letter said.

The letter was also signed by the American Bankers Association, the American Financial Services Association, the Community Mortgage Banking Project, the Community Mortgage Lenders of America, the Independent Community Bankers of America, the Mortgage Bankers Association, the National Association of Federal Credit Unions, the National Association of Mortgage Brokers, the National Association of Realtors, the National Federation of Independent Business, the Real Estate Services Providers Council, Inc., and the Small Business & Entrepreneurship Council.

Disclosure changes must not increase CU burden CUNA to iN.Y. Timesi

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WASHINGTON (6/14/12)--While consumers would benefit from greater simplicity and clarity in checking account disclosures, any disclosure changes that are made must be achieved without exacerbating credit unions' already heavy regulatory burden, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a New York Times blog post this week.

The Times this week covered a recent Pew Charitable Trusts study that found that credit unions and banks could both stand to improve their checking account disclosures. The Pew study analyzed checking account data from the nation's 12 largest credit unions and 12 largest banks.

In the study, Pew noted overall that financial institutions "do not summarize important policies and fee information in a uniform, concise, and easy-to-understand format" and "do not provide accountholders with clear and comprehensive information about overdraft options and their costs."

Cheney told The Times that account disclosures "to a large degree are dictated by regulatory requirements," but said CUNA has discussed account disclosure issues with the Consumer Financial Protection Bureau.

The study also focused on overdraft programs and fees, noting that the median overdraft fee charged at credit unions mentioned in the study was $25. This fee was $10 below the median bank fee of $35. Median non-sufficient fund fees charged by credit unions totaled $26, lower than median bank fees, which totaled $35, the study said.

Cheney said credit unions need the flexibility to "reasonably and fairly" price their overdraft programs, and said CUNA is developing overdraft program best practices that it will share with member credit unions.

Overall, credit unions charged fewer account fees, on average, than banks, and a greater percentage of credit unions offered interest-bearing accounts, the study said.

For the New York Times post and the Pew Charitable Trusts study, use the resource links.

Inside Washington (06/13/2012)

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  • WASHINGTON (6/14/12)--Federal Reserve Governor Daniel Tarullo on Tuesday offered details for reforming the shadow banking system--that collection of financial intermediaries such as hedge funds, finance companies and securities dealers without access to central bank liquidity or public sector credit guarantees. The first of three steps that regulators could take is to create greater transparency among the transactions and markets that compose the shadow banking system, Tarullo said. Second, the risk of runs on money market mutual funds should be reduced to improve the resiliency of those funds, he said. The Securities and Exchange Commission is considering several possible reforms--in addition to those it made in 2010--including a floating net asset value, capital requirements and restrictions on redemption. A third short-term priority is to address the settlement process for three-party repurchase agreements. An industry-led task force was established in 2009 to initiate some improvements to the settlement process, but Tarullo said the reforms are not sufficient. "The shadow banking system today is considerably smaller than at the height of the housing bubble six or seven years ago," Tarullo said. "And it is very likely that some forms of shadow banking most closely associated with that bubble have disappeared forever. But as the economy recovers, it is nearly as likely that, without policy changes, existing channels for shadow banking will grow, and new forms creating new vulnerabilities will arise" …
  • WASHINGTON (6/14/12)--JPMorgan Chase traders "did not have the requisite understanding of the risks they took" when making the trades that led to the firm's massive trading losses suffered in May, JPMorgan President/CEO Jamie Dimon told the Senate Banking Committee on Tuesday. The company's strategy for reducing the synthetic credit portfolio was poorly conceived and vetted, Dimon added. Also, its strategy was not carefully analyzed or subjected to rigorous stress testing, Dimon said. JPMorgan is "embarrassed" by the incident, but Dimon urged lawmakers to put the loss into perspective. "We will lose some of our shareholders' money--and for that, we feel terrible--but no client, customer or taxpayer money was impacted by this incident." At the end of the first quarter, the company held $190 billion in equity and more than $30 billion in loan loss reserves, Dimon said. Since the loss, the company has hired a new chief risk officer, chief financial officer, global controller and European head, and also established a new risk committee structure …
  • WASHINGTON (6/14/12)--Thomas Hoenig and Jeremiah Norton, both recently sworn in as members of the Federal Deposit Insurance Corp.'s (FDIC) board, said Tuesday they are concerned that new bank-capital rules may not sufficiently limit financial system risk (The Wall Street Journal June 13). FDIC and Office of the Comptroller of the Currency earlier this week approved draft rules based on an agreement reached by international regulators in Basel, Switzerland, about a year ago. Banks have 90 days to comment on the proposed rules, which are identical to those released last week by the Federal Reserve Board. Hoenig expressed concern that the proposal's complexity will make it costly to implement and increases its chances of being "gamed." Norton said the capital requirements under the Basel proposal might not be high enough for the largest U.S. banks …

Reg Z changes threaten consumers CUNA warns

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WASHINGTON (6/13/12)--The Credit Union National Association (CUNA) in a comment letter agreed with the Consumer Financial Protection Bureau's (CFPB) position that it lacks the authority to regulate card fees charged before an account is opened, such as an application fee, but CUNA also warned that the CFPB's decision to regulate only fees charged after account opening could subject consumers to potentially abusive fees from non-credit union lenders.

CUNA said it believes that credit unions do not charge such fees.

The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) amended the Truth in Lending Act's (TILA) Regulation Z to, among other things, prohibit lenders from charging fees on a credit card account in the first year that exceed 25% of the account's initial credit line. This 25% limit was extended by the Federal Reserve in April 2011 to include application fees and other fees that customers could be charged before an account is opened.

This extension of TILA was challenged in court, with First Premier Bank and Premier Bankcard LLC last year filed a lawsuit against the CFPB arguing that the regulator was exceeding its authority by seeking to regulate fees that are paid before account opening.

The CFPB, which took over Reg Z authority from the Fed, has moved to amend Reg Z "to resolve the uncertainty caused by the litigation." Under the proposed CFPB amendment, the 25% fee limit would apply only to fees charged after a credit card account has been opened, for the first year of the account.

While the decision to extend the card fee limitation to address early account fees did not hold up, CUNA Deputy General Counsel Mary Dunn said that if the CFPB determines it has authority under some other statutory provisions, it should issue another proposal that would be subject to public comment.

For the full comment letter, use the resource link.

CUs hear from IRS on Form 990 issues

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WASHINGTON (6/13/12)--In a communication that appears to respond to credit union and Credit Union National Association (CUNA) concerns regarding recent Form 990 issues, the U.S. Internal Revenue Service (IRS) has advised any state credit unions that have received letters claiming to revoke their tax exemption, or whose tax status has been actually revoked, to contact the agency and/or apply for reinstatement of their tax-exempt status, depending on their situations.

The IRS in guidance posted to its homepage advised credit unions that believe their tax-exempt status has been erroneously revoked to contact the IRS. The tax agency recommended that credit unions "explain the situation and provide the information required to update IRS records." State-chartered credit unions whose tax status has been actually revoked because they did, in fact, fail to file Form 990 for three consecutive tax years must apply for reinstatement, the IRS added.

A list of credit unions who have received automatic revocation letters is also provided on the web page.

While consolidating this tax issue information into one spot is a good first step, CUNA General Counsel Eric Richard said the IRS actions fail to address one situation: that of federal credit unions that have received revocation letters, or been placed on the list, because they file Form 990-T in claiming the health insurance premium tax credit.

Federal credit unions that wish to claim health insurance premium tax credits are required to file Form 990-T, and the filing of these forms apparently triggers a search by the IRS computer for past Form 990 filings. Under U.S. Internal Revenue Code, section 501(a) exempt organizations are required to report their gross income, receipts, and disbursements on IRS 990 forms.

If no Form 990 filings are found in the records, an exemption revocation letter is automatically sent to the credit union. However, Richard has noted, federal credit unions are not required to file Form 990 and should not be receiving these letters.

CUNA continues to work on this issue, and earlier this year urged the tax agency address this issue as soon as possible. The 2012 deadline for Form 990-T filings passed on May 15.

Baucus wants tax reforms to be lame duck issue

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WASHINGTON (6/13/12)--Revising the tax code to promote competitiveness, innovation and opportunity, and creating jobs from broad-based growth will be "at the heart" of an upcoming tax reform plan, Senate Finance Committee Chairman Max Baucus (D-Mont.) said in remarks made this week.

The current Bush-era tax rates are set to expire on Jan. 1, 2013, and the Obama Administration and legislators are preparing for that expiration.

Speaking before the Bipartisan Policy Center in Washington this week, Baucus has suggested that Congress could take up tax issues in the so-called lame duck session following November's elections. He met with Senate Democratic colleagues on tax issues, and has scheduled a private meeting of his Senate Finance Committee colleagues this week, The New York Times reported.

House Ways & Means Committee Chairman Dave Camp (R-Mich) has also discussed his own tax reform priorities in recent weeks, and Camp suggested extending current tax rates for a further six months.

Baucus said Congress "needs to take a hard look at each and every expiring provision to decide which to make permanent and which to eliminate… We need to get out of the way of the market, unless there is clear evidence that a tax expenditure spurs growth and creates jobs."

Baucus added that the tax code should encourage U.S. companies to keep jobs "here at home," should bolster innovation, and keep up with changing social and business environments.

"Every tax provision needs to prove it has a tangible benefit to our economy or society.  If not, it doesn't belong in the tax code," he added.

The tax-exempt status of credit unions has not been mentioned in any of the current reform discussions. However, preserving the credit union tax status is a top Credit Union National Association (CUNA) priority, and CUNA will remain engaged and vigilant as tax reform discussions move forward.

Cheney Fryzel discuss MBLs other key CU issues

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WASHINGTON (6/13/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney and National Credit Union Administration (NCUA) Board Member Michael Fryzel discussed member business lending, the credit union tax status, examinations and other credit union issues at a Tuesday panel discussion at the 2012 annual convention of the Maryland and District of Columbia Credit Union Association (MDDCCUA).

Cheney said the panel featured "a productive discourse" on many issues, "including how credit unions would adjust to a higher cap on business loans, the future of supplemental capital, reducing regulatory burden and more." The Cheney/Fryzel panel discussion was moderated by MDDCCUA President/CEO John Bratsakis.

The panelists also discussed the impact of the resolution of corporate credit unions on their own tenures in their current offices. Both men arrived at their respective positions at key points in the resolution of the recent corporate credit union crisis.

Fryzel said the credit union system must continue the successful implementation of the corporate resolution plan, and noted that today's corporate credit unions "can provide all the services that were provided in the past. However, he said, "the service array is dependent upon the members' willingness to provide capital.

"This is a decision that is best left with the credit union industry," he said.

Fryzel said these types of open discussions with credit union officials give him "a fresh perspective" and help him in his decision-making. Open dialogue is "vital for the continued success of the credit union industry," he added.

Cheney said he thought the audience learned from their perspectives on these issues,"which intersected in some cases and diverged in others."

Inside Washington (06/12/2012)

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  • WASHINGTON (6/13/12)--The Consumer Financial Protection Bureau is reviewing the role of big banks in making discriminatory indirect auto loans, according to the American Banker (June 12). The investigation is based on a report released by the Center For Responsible Lending, which said auto dealers tend to mark up interest rates more for borrowers with weaker credit and rate markups are a strong driver of default and repossession among subprime borrowers. Loan-level data showed that African-Americans and Latinos disproportionately received interest rate markups more frequently and to a greater degree than similarly situated white counterparts.  Since the loans are originated by auto dealers, banks are not directly involved in the misconduct, according to both consumer advocates and attorneys representing banks. Auto dealers underwrite loans and sell them at a wholesale rate to banks. If borrowers pay more than the wholesale rate of interest, the dealer and the bank split the extra profit known as "dealer participation" or "dealer markups" …
  • WASHINGTON (6/13/12)--Two community banks are making bids on their own shares as part of the latest auction by the Treasury Department to sell off its stakes in seven banks that received funds during the financial crisis (American Banker June 12). First Defiance Financial in Defiance, Ohio, and First Capital Bancorp in Glen Allen, Va., announced Monday they would attempt to purchase their own shares. Industry observers said the banks are likely to submit discounted bids for their shares. In a similar auction conducted by the Treasury in March, MainSource retired $21 million of its $57 million of Troubled Asset Relief Program (TARP) funds for about $20 million. Also at that time, Wilshire Bancorp in Los Angeles retired $60 million of its $62 million of TARP funds for roughly $57 million. First Defiance said in its regulatory filing that it plans to redeem any stock it doesn't buy in the auction within the next 12 months. First Capital has no plans to redeem its stock, the Banker said …

NCUA bans three from future CU work

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ALEXANDRIA, VA. (6/13/12)--Three former credit union employees--one from Texas, one from Kansas, one from Maine--have been barred by the National Credit Union Administration (NCUA) from participating in the affairs of any federally insured financial institution.

The NCUA prohibition orders provide the following details:
  • Anna Marie Salazar, a former employee of Alamo FCU, San Antonio, Texas, was convicted of embezzlement by a credit union employee, was sentenced to 41 months in prison, five years supervised release, and ordered to pay restitution in the amount of $725,047.33;
  • Jeanette L. Young, a former employee of Bluestem Community CU, El Dorado, Kan., consented to the issuance of a prohibition order and agreed to comply with all of its terms to settle and resolve the NCUA board's claims against her; and
  • Marsha Richard, a former employee of Atlantic Regional FCU, Brunswick, Maine, was convicted of theft by a credit union employee. Richard was sentenced to 33 months in prison, five years supervised release, and ordered to pay restitution in the amount of $468,217.06.
NCUA enforcement orders are online at http://go.usa.gov/yiJ and may inspected at the NCUA's Office of General Counsel between 9 a.m. and 4 p.m. (ET) Monday through Friday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

233M for CDFI approved by Senate subcommittee

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WASHINGTON (6/13/12)--The Senate Appropriations subcommittee on financial services and general government Tuesday approved the draft of its appropriations package for fiscal year 2012, which includes $233 million for the U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund.

That funding level would represent a $12 million increase above the 2012 enacted level of $221 million.

The CDFI Fund was created to promote economic revitalization and community development through investment in and assistance to qualified community development financial institutions (CDFIs), which include credit unions.

The fund's mission is to expand the capacity of CDFIs to provide credit, capital, and financial services to underserved populations and communities in the United States

.

The subcommittee appropriations draft, overall, covers $21.73 billion in discretionary spending for the nation's consumer and financial oversight agencies, which includes more than two dozen agencies within the Executive Branch, the federal courts, the District of Columbia, and independent agencies.

The full committee is scheduled to markup the bill Thursday.

Corporate stabilization assessment expected on July agenda

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ALEXANDRIA, Va. (6/12/12)--National Credit Union (NCUA) Director of Examinations and Insurance Larry Fazio has acknowledged to the Credit Union National Association (CUNA) that agency staff anticipate presenting a recommendation at the July open board meeting regarding the corporate stabilization fund assessment.

Fazio said the 2012 assessment is expected to be "within the range of 8 to 11 basis points as provided back in November 2011 for credit union budgeting purposes." That compares with 25 basis points in 2011.

Earlier this year, CUNA predicted the corporate stabilization assessment would be around nine bp of insured shares in 2012.

CUNA Deputy General Counsel Mary Dunn said the 2012—standing to be well under half of what it was just one year ago—is a positive welcome development.  She added that CUNA will continue to monitor the agency's management of the legacy assets in which some of the corporates had invested.

Inside Washington (06/11/2012)

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  • WASHINGTON (6/12/12)--Allonhill LLC, one of the consultants hired to determine the extent of foreclosure abuses, was released Friday by Office of the Comptroller of the Currency (OCC), which said the firm had a conflict of interest. The Denver-based consulting firm was the primary independent consultant for Aurora Bank FSB, and had also reviewed Wells Fargo loan files as a subcontractor for Promontory Financial Group, OCC said. Allonhill reported that it had made prior reviews of loans that are part of the same pool of loans in the current review, the OCC said. In April, OCC, the Federal Reserve, and the Office of Thrift Supervision announced enforcement actions against 14 large residential mortgage servicers and two third-party vendors for unsafe and unsound practices related to residential mortgage servicing and foreclosure processing …

Foreign economic woes highlights MBL need CUNA

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WASHINGTON (6/12/12)--As a deepening economic crisis in Europe threatens the fragile economic recovery in the U.S., the Credit Union National Association (CUNA) urges lawmakers to move forward to enact a bill that would enable credit unions to do even more to support the U.S. economy by providing more credit to small businesses.

President Barack Obama "has encouraged Congress to enact a jobs plan to help small businesses weather this impending (European)  threat, and we believe credit unions are in a position to help," CUNA President/CEO Bill Cheney says in a letter that will be sent today to U.S. Senate and House majority and minority leaders.

"Credit unions are not nearly as exposed to the issues in Europe as banks, especially larger banks.  As a result, credit unions are better positioned to lend to small businesses," Cheney writes.

The Credit Union Small Business Jobs Act (S. 2231) would increase credit unions' ability to support small businesses by increasing the cap on member business lending for healthy credit unions with significant business lending experience to 27.5% of assets, up from the current 12.25%.

"During the most recent financial crisis, credit unions increased business lending while banks scaled back lending and, in some cases, withdrew from the market," the CUNA letter notes.

It highlights CUNA's observation that if the MBL legislation became law, credit unions could make $13 billion in additional credit available to America's small businesses in the first year.  It would help to create 140,000 new jobs in that timeframe.  And those economic improvements would come at no cost to the American taxpayer.

Noting bank groups' opposition to the MBL bill, Cheney also highlights hypocrisy in their arguments. For instance, he says, bank groups argue that the MBL would severely harm their member banks; but on the other hand they argue the bill is not needed because it would affect only a small number of credit unions.

"The American economy has not yet fully recovered from the last bank-caused crisis, and storm clouds are forming on the horizon as the crisis in Europe deepens," Cheney writes, and warns that without an increase in the MBL cap credit unions will not be able to help in the same way during the next crisis. CUNA estimates there are about 500 whose lending activity is already affected by the current low cap.

"It's time to say 'no' to those who don't want choice and 'yes' to small businesses" by enacting S. 2231, Cheney concludes the letter.  The CUNA letter is being sent to Senate Majority Leader Harry Reid of Nevada and Senate Minority Leader Mitch McConnell of Kentucky, as well as House Majority Leader John Boehner of Ohio and House Minority Leader Nancy Pelosi of California.

Senate leadership has said there will be a vote this year on the MBL legislation.

HUD reaches resolution with B of A Fair Housing complaint

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WASHINGTON (6/12/12)--The U.S. Department of Housing and Urban Development (HUD) last week announced that Bank of America has agreed to pay up to $161,180 to settle allegations that one of the bank's California branches refused to refinance the mortgage of a woman because she was on maternity leave.

The agreement resolves a Fair Housing Act complaint that had been filed by the Fair Housing Council of Orange County (FHCOC), a non-profit fair housing organization funded by HUD.

According to a HUD release, an Irvine woman told FHCOC that a Bank of America agent offered her a 5% interest rate for a home refinance loan in December 2009, with no costs or fees.  However, it said, the following month, after she had applied for the loan and provided the proper documents, the bank allegedly refused to process the women's application because she was on maternity leave.

HUD said the woman alleged that a bank agent told her that she would have to return to work full-time in order for her loan to be approved. HUD said the woman alleged that the bank would not process her application even after she informed the bank that she received the same rate of pay and benefits while on maternity leave.  

In March 2010, the bank finally approved the woman's application, HUD said, but the interest rate on her loan had increased to 5.25% by that time, driving up the loan payment size.

The HUD release said a Bank of America official said: "We regret our treatment of the applicant. We take our Fair Lending responsibilities very seriously and will work with HUD to ensure our customers on maternity leave are treated appropriately during the mortgage application process."

Legislators ask CFPB DOE to examine bankcollege cards

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WASHINGTON (6/11/12)--Noting in a release that many colleges are pushing students into using campus debit cards that carry "numerous unnecessary, costly and unknown bank fees," Sen. Richard Durbin (D-Ill.) and Rep. George Miller (D-Calif.) last week urged the Department of Education and the Consumer Financial Protection Bureau (CFPB) to examine the bank-affiliated student debit card practices at more than 900 colleges and universities.

The legislators in a letter to CFPB Director Richard Cordray, Secretary of Education Arne Duncan, and Department of Education Inspector General Kathleen Tighe said they were concerned over the issues that bank/university debit card agreements could be creating for college students.

The debit cards held by many students "may come with high user fees, hidden transaction costs and insufficient consumer protections – adding to the mountain of debt many higher-education students must take on," they added. "U.S. student loan debt is reaching the $1 trillion mark, we should not allow costly and inappropriate debit card fees to add to that debt," the legislators said.

The release cited a U.S. Public Interest Research Group (PIRG) report that named PIN debit fees, balance inquiry fees, abandoned account fees, account closure fees, and prepaid debit card reloading fees among those giving students trouble.

However, PIRG in a separate release said "a well-structured debit card program can provide benefits to students."

Credit unions in many states offer the benefits of credit union membership to students through on-campus branches or college- or university-affiliated credit unions that serve students and employees of the school.

ATM disclosure bill slated for committee markup

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WASHINGTON (6/11/12)--Legislation that would ease the current ATM fee disclosure regulations that are, in some cases, leading to bogus lawsuits against ATM operators will be the subject of a June 27 markup session, House Financial Services Committee Chairman Spencer Bachus (R-Ala.) announced Friday.

The hearing is scheduled to begin at 10:00 a.m. ET.

The ATM bill, known as H.R. 4367, was introduced by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) in April. It has 95 cosponsors.

The Credit Union National Association (CUNA) strongly supports this legislation and "has worked very hard over the last several weeks to move this legislation to mark up," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.

"CUNA lobbyists and league staff have met with a majority of the members of the financial services committee on this legislation, and as a result of our effort, this legislation has been cosponsored by many of the members of the committee. We hope that the bill will see floor consideration soon after the mark up," he added.

The bill would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee.

"This legislation addresses one example of an unnecessary regulatory burden for credit unions that provides no benefit to consumers," Donovan said. "As we have approached this bill, our intention has not been to reduce disclosure or consumer information, but rather ensure that credit unions are able to efficiently use the resources of the credit union to the benefit of the member," he added.

CUNA has also asked the Consumer Financial Protection Bureau (CFPB) to address the ATM disclosure issue.

ATM disclosure requirements have caused issues for credit unions and other financial institutions. CUNA has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb.

CUNA recently estimated that the total number of these lawsuits could be in the hundreds, and many credit unions are settling the suits to avoid the cost of litigation.

Other items on the June financial services schedule include:
  • A June 19 House Financial Services Committee hearing on JPMorgan Chase's recent multi-billion dollar trading loss. JPMorgan CEO Jamie Dimon is scheduled to testify;
  • A June 20 House capital markets and government sponsored enterprises subcommittee hearing on the structure of U.S. equity markets;
  • A June 20 House insurance, housing and community opportunity subcommittee hearing on the Consumer Financial Protection Bureau's recent mortgage closing disclosure work;
  • A June 21 House financial institutions and consumer credit subcommittee hearing on money service businesses;
  • A June 28 House insurance, housing and community opportunity subcommittee hearing on the appraisal industry and mortgage regulations; and
  • A June 28 House domestic monetary policy and technology subcommittee hearing on the impact of fractional reserve banking on monetary policy.
The committee release emphasized this schedule is subject to change.

NCUAs Fryzel calls for credit union nation

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ALEXANDRIA, Va. (6/11/12)--National Credit Union Administration (NCUA) board member Michael Fryzel last week urged New York credit unions to "take the reins of a movement that is poised on the cusp of greatness, of great expansion, of new popularity" and turn the United States into "a credit union nation."

Speaking before the Credit Union Association of New York's annual convention in Bolton Landing, N.Y., Fryzel praised New York credit unions for their high levels of performance.

New York credit unions, he noted, have grown membership nearly two-thirds the national average, and have grown their member shares at the national average of 18.7%. Loan and capital growth rates have also exceeded national averages. "These are extraordinary results," he said.

"Right now ordinary Americans are seeing the pocket-book advantages of credit unions and opening accounts in record numbers. The credit union business-model makes sense to more and more people every day. People are seeing the advantage of an organization whose board of directors is pledged to work not for a profit but solely for the benefit of the persons who join," Fryzel said.

Overall, he added, credit unions "are a dynamic and developing industry" that can grow to reach every household in America. Those single accounts "can become five, and five accounts can lead to mortgages, auto loans, small business loans," all serving to families keep more of their hard-earned pay than they could by using alternative financial services, he said.

For more on the speech, use the resource link.

Inside Washington (06/08/2012)

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  • WASHINGTON (6/11/12)--The Federal Reserve Board on Thursday approved a final rule to implement changes to the market risk capital rule based on an international agreement known as Basel III. The new rule requires banks with significant trading activities to adjust their capital requirements to better account for the market risks of those activities (American Banker June 8). Banks will be required to maintain top-quality capital equivalent to 7% of their risk-bearing assets. The final rule applies to bank holding companies and state-chartered banks that are members of the Federal Reserve System. The new rules will become effective Jan. 1, but banks will not be required to be in full compliance until 2019 …
  • WASHINGTON (6/11/12)--Although the Federal Reserve is limited in its ability to ease Europe's economic difficulties, the central bank remains prepared to withstand any ill effects from overseas that may touch the U.S., Federal Reserve Chairman Benjamin Bernanke said Thursday. "As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate," Bernanke told a congressional committee Thursday. Concerns about sovereign debt and the health of banks in many European countries have has acted as a drag on U.S exports, weighing on business and consumer confidence, Bernanke said. Lawmakers can help improve the U.S. economy by adopting fiscal policy that results in a stable or declining ratio of federal debt to gross domestic product, Bernanke said …
  • WASHINGTON (6/11/12)--West Virginia Rep. Shelley Moore Capito (R-W. Va.) has asked the Federal Deposit Insurance Corp. (FDIC) to assess the cost of a program that allows banks to offer its customers unlimited deposit insurance on noninterest-bearing transaction accounts. Lawmakers must decide whether to extend the four-year-old Transaction Account Guarantee (TAG) program when it expires Dec. 31 (American Banker June 8). FDIC initiated TAG as a voluntary program in 2008 during the financial crisis to address concerns that a large number of account holders might withdraw their uninsured account balances from financial institutions due to economic uncertainties. In 2010, Congress extended the program through 2012 and required participation from all banks.  Generally, small banks support a further extension of the program, while large banks are against it …

New ability-to-pay comment process may be burdensome CUNA

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WASHINGTON (6/8/12)--The Consumer Financial Protection Bureau recently re-opened the comment period for a proposed ability-to-repay rule to collect specific data and information on mortgage lending underwriting criteria and loan performance, but the Credit Union National Association (CUNA) in a new comment call warned this and other information sought by the bureau "is highly technical and may be very difficult and time consuming for credit unions to provide."

The CFPB's ability-to-repay rule comment deadline was extended to July 9 after new mortgage data came to light, the CFPB explained. Agency director Richard Cordray said the sheer volume of comments the agency has received regarding the issue also contributed to the decision to extend the comment period.

For the new comment round, the CFPB has expanded its request for information and has asked for data on estimates of litigation costs and liability risks associated with claims alleging an ability-to-repay requirements violation, for both qualified and non-qualified mortgage loans. However, CUNA in the comment call noted that responses to questions regarding possible litigation would be speculative at best.

CUNA has weighed in with the CFPB to let the bureau know that providing responses to this request for comments will be extraordinarily burdensome. However, credit unions that wish to forward their comments to CUNA may do so until July 2. (For the CUNA comment call, use the resource link)

The CFPB has said the new data and public comments could change how it designs the final rule.

Under the still-developing CFPB rule, mortgage originators would be required to consider a homebuyer's ability to repay a loan before a loan could be offered. The CFPB's ability-to-repay requirements would apply to consumer credit transactions that are secured by a dwelling and be further defined by the agency's definition of a qualified mortgage (QM).

A final version of a QM rule was scheduled to be released this summer, but the CFPB has also pushed that date back—likely to late this year.

The ability-to-repay rule was one of many topics discussed at a Wednesday Senate Banking Committee hearing on Dodd-Frank Wall Street Reform Act implementation.

Cordray testified on a panel with Deputy U.S. Treasury Secretary Neal Wolin, Federal Reserve Governor Daniel Tarullo, Comptroller of the Currency Thomas Curry, and Acting Federal Deposit Insurance Corporation Chairman Martin Gruenberg.

Cordray said the CFPB would not convene a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel before the ability-to-repay rule is issued. However, he did encourage concerned small businesses to contact the CFPB directly with their comments.

Under certain circumstances,  the CFPB is required to hold SBREFA panels to gauge the potential impact that upcoming regulations could have on small businesses, but Cordray noted Wednesday that a panel would not be held in this case, as the rule was a Federal Reserve project at first.

A new qualified residential mortgage (QRM) definition, and accompanying rules, was also discussed, but federal regulators on Wednesday said they would wait for the CFPB to complete its ability-to-repay work before they moved forward on the QRM rulemaking.

Accounting council could have big impact on CU operations CUNA

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WASHINGTON (6/8/12)--The Financial Accounting Foundation's (FAF) recently established Private Company Council (PCC) could have important implications for credit union operations, according to the Credit Union National Association (CUNA).

The council will review existing U.S. generally accepted accounting principles (GAAP) and determine how those standards could be improved to better serve the needs of private companies. The group could then make recommendations to the Financial Accounting Standards Board (FASB), as needed.

The council will also advise FASB on how certain agenda items that FASB is considering could impact private companies.

CUNA has repeatedly emphasized that financial accounting standards for credit unions and other private companies need to be improved, and has called for the challenges that many credit unions and others face due to the complexity of existing accounting standards to be addressed.

CUNA has also called on FASB to "take the steps necessary to mitigate the burden on smaller entities, particularly when there is no or only minimal resulting benefit."

The PCC could recommend that FASB endorse changes on these and other issues once the council is up and running, CUNA Assistant General Counsel Luke Martone said. If endorsed by FASB, a proposal would then be open for public comment. Once comments have been received the PCC would then have an opportunity to seek a final decision on endorsement from FASB; if FASB endorses the changes they would then be incorporated into GAAP.

The FAF is accepting nominations for the council, which will be comprised of nine to 12 members. Financial statement users, financial statement preparers, and auditors are among those that may be nominated for a PCC post. Members will serve initial three-year terms and may be reappointed to a subsequent two-year term.

Many organizations made recommendations to the FAF as the PCC was developed, and one CUNA suggestion, requiring that the PCC chair not be a FASB member, was accepted.

CUNA is reviewing the FAF's report on the new council with its Accounting Subcommittee, and will update credit unions on future PCC actions.

For more on the council, use the resource link.

NCUA CDRLF funding passes House subcommittee

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WASHINGTON (6/8/12--Funding for the National Credit Union Administration's (NCUA) Community Development Revolving Loan Fund (CDRLF) program would be less than half of the Obama administration's requested budget under an appropriations bill approved by the House Appropriations subcommittee on financial services this week.

The CDRLF, which provides loans and technical assistance to federal and state credit unions that are designated as low-income credit unions, as defined by NCUA regulations, would only receive $500,000.

The Obama administration requested $1.19 million in funds for the 2013 edition of the CDRLF earlier this year.

A total of $1.25 million in CDRLF funding was approved in the 2012 budget.

Funding for the U.S. Treasury's Community Development Financial Institutions (CDFI) fund would hold steady in 2013, matching the 2012 budget's funding level of $221 million.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community. CDFI fund distributions are merit-based.

A total of 44 credit unions applied for a combined $59 million in funding during the 2012 round of the CDFI Fund, and the fund awarded $142,302,667 to 155 institutions, including 25 credit unions, in 2011.

The next step for this appropriations bill is a full House Appropriations Committee vote.

Inside Washington (06/07/2012)

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  • WASHINGTON (6/8/12)--House Democrats on Wednesday criticized a bill that would require a self-regulatory organization for registered investment advisers. The Investment Adviser Oversight Act of 2012, sponsored by Financial Services Committee Chairman Spencer Bachus (R-Ala.), and Carolyn McCarthy (D-N.Y.), would shift oversight from the Securities and Exchange Commission (SEC) to a self-regulatory organization (SRO), most likely the Financial Industry Regulatory Authority (American Banker June 7). Congress should weigh an increase in funding for the SEC before creating a SRO, said Barney Frank (D-Mass.). Maxine Waters (D-Calif.) said she will introduce a measure that would provide the SEC with the authority collect user fees from advisers to fund more examinations. State regulators have also argued against the proposal, saying that an SRO would negatively affect smaller investment firms currently regulated by the states …
  • WASHINGTON (6/8/12)--Democratic senators Wednesday criticized Office of the Comptroller of the Currency (OCC) head Thomas Curry for his agency's handling of the JPMorgan Chase's $2 billion trading loss. Jeff Merkley (D-Ore.) one of the authors of a proposal to prohibit firms from making proprietary trades, said JPMorgan's trades would not have been allowed under the rule, known as the Volcker Rule (American Banker June 7). Curry was unable to say whether his London or New York offices had full authority to direct the trade that led to the losses. Sherrod Brown (D-Ohio) said the OCC failed to meet acceptable standards in providing strong risk management and audit functions. Brown questioned if such a large trade should have been made without the OCC's knowledge …
  • WASHINGTON (6/8/12)--The Consumer Financial Protection Bureau (CFPB) is extending the comment period for its mortgage banking compensation proposals. On Monday, the CFPB sent out an e-mail to the 17 participants in the program notifying them that questions remain whether origination fees in transactions with creditor-paid and brokerage-paid compensation should vary with the size of the loans (American Banker June 7). In May, the CFPB asked mortgage professionals at firms with less than $7 million in annual revenue to discuss and provide comments on the agency's compensation proposals, which are nearly 40 pages long …
  • WASHINGTON (6/8/12)--The Financial Crimes Enforcement Network (FinCEN) has made a tweak to its Currency Transaction Report rule that allows depository institutions to exempt transactions of certain payroll customers from the requirement to report transactions in currency in excess of $10,000. The change substitutes the term "frequently" for the similar-but-not-identical term "regularly" in the provision of the exemption. The change brings the exemption clause for payroll customers in line with the one that governs exemptions for "non-listed businesses."  In other words, under the old rule, a non-listed business, to be exempt, had to, among other things, "frequently engage in transactions in currency with the bank in excess of $10,000."  To be an exempt payroll customer, a person had to, among other things, "regularly withdraw more than $10,000 in order to pay its U.S. employees in currency." FinCEN interpreted "frequently" to mean five or more transactions a year but had no specific interpretation of the term "regularly" …
  • WASHINGTON (6/8/12)--The Nationwide Mortgage Licensing System & Registry (NMLS) has released the "Nationwide View of State-Licensed Mortgage Entities" and the "NMLS Federal Registry Quarterly Report" for the first quarter 2012. The two reports provide a overview of all individuals, mortgage companies and depository institutions originating U.S. residential mortgages. The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit union mortgage loan originators and their employing institutions to register with the NMLS. …

CFPB rules outline enforcement approach

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WASHINGTON (6/7/12)--The Consumer Financial Protection Bureau (CFPB) has outlined its procedures and practices for enforcing federal consumer law in four new rules.

Three of the rules are final rules, and will become effective once they are published in the Federal Register. Credit Union National Association Regulatory Counsel Jared Ihrig noted the CFPB rules will only address enforcement, not regulation.

Ihrig said the CFPB's investigation rules are most relevant for credit unions. The agency release said the rule "lays out an efficient and fair process for conducting CFPB investigations," and covers procedures for issuing civil investigative demands. The rule also describes the rights of individuals who are under CFPB investigation.

Final rules addressing adjudication proceedings and how the CFPB is updated on state-level legal actions involving Dodd-Frank Act compliance have also been developed by the CFPB.

The fourth rule is an interim final rule that implements the Equal Access to Justice Act, which, according to the CFPB, allows some prevailing parties in administrative proceedings to recover attorney fees and expenses.

The CFPB said the rule sets forth who can seek to recover legal costs, and how they may attempt to do so.

Public comment on the interim rule will be accepted for 60 days after it is published in the Federal Register.

For more on the rules, use the resource link.

Inside Washington (06/06/2012)

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  • WASHINGTON (6/7/12)--The Treasury Tuesday said it will sell preferred stock in seven banks as part of its efforts to wind down the Troubled Asset Relief Program. The banks are: Ameris Bancorp, Moultrie, Ga.; Farmers Capital Bank Corp., Frankfort, Ky.; First Capital Bancorp Inc., Glen Allen, Va.; First Defiance Financial Corp., Defiance, Ohio; LNB Bancorp Inc., Lorain, Ohio; Taylor Capital Group Inc., Rosemont, Ill.; and United Bancorp Inc., Ann Arbor, Mich. Treasury has recovered $264 billion from TARP's bank programs through repayments, dividends, interest, and other income--compared with the $245 billion initially invested. It has remaining outstanding preferred stock investments in 343 banks.  Treasury intends to announce additional preferred stock auctions in the coming weeks and expects to begin the auctions, which will be registered public offerings, on or about June 11 …
  • WASHINGTON (6/7/12)--Community banks for the most part are sufficiently capitalized to meet the new minimum capital levels required by Basel III capital rules, George French, the Federal Deposit Insurance Corp. (FDIC) deputy director of  risk management supervision said Tuesday (American Banker June 6). The FDIC board will meet June 12 to discuss implementation proposals for the Basel international agreement. Most community banks "overwhelmingly" meet the capital requirements proposed by the Basel committee, French said at a meeting of the FDIC's community bank advisory panel …
  • WASHINGTON (6/7/12)--The Systemic Risk Council, a private sector, volunteer group led by former Federal Deposit Insurance Corp. chair Sheila Bair, will convene this month to monitor and encourage regulatory reform of U.S. capital markets focused on systemic risk. The independent, non-partisan council was formed by CFA Institute, a global association of investment professionals, and The Pew Charitable Trusts, an independent nonprofit organization. The Systemic Risk Council comprises experts in investments, capital markets and securities regulation, including senior adviser Paul Volcker, former chair of the Federal Reserve.  Concerns over the slow progress of regulators and standard-setters prompted the council's formation, Bair said.  The group will monitor and evaluate the agencies that oversee the implementation of Dodd-Frank provisions related to systemic risk, including the Financial Stability Oversight Council and the Office of Financial Research. "The great challenge is to devise a system to identify risks that threaten market stability before they become a danger to the general public," said Bair. "As evidenced by the 2008 crisis and even recent headlines, we need a more effective and efficient early-warning system to detect issues that jeopardize the functioning of U.S. financial markets before they disrupt credit flows to the real economy. And two of the most critical tasks are how to impose greater market discipline on excess risk taking and effectively end the doctrine of too-big-to-fail" …

CU candidates win big in Tuesday primaries

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WASHINGTON (6/7/12)--Credit union-backed primary candidates "had a good night" on Tuesday, with the majority of them moving on to run in November's general election contests, Credit Union National Association Vice President of Political Affairs Trey Hawkins reported.

All in all, the Credit Union Legislative Action Council (CULAC) supported candidates in 57 of Tuesday's 78 primary contests, and 57 of those CULAC-backed candidates will run in November's general election. Primaries were held in California, Iowa, Montana, New Jersey, New Mexico and South Dakota.

One of those candidates is current U.S. House member Martin Heinrich (D-N.M.), who will run for New Mexico's open Senate seat after he defeated primary opponent Hector Balderas (D) by winning 59.1% of the Democratic primary votes. Heinrich, who is backed by CULAC and the Credit Union Association of New Mexico (CUANM) and has supported House member business lending legislation, will face Republican Heather Wilson this fall.

Also in New Mexico, Ron Griggs, who has credit union ties, defeated former Independent Community Bankers Association of New Mexico Chair Sarah Dion Kidd-Johnson to win the Republican state senate nomination for the 34th district. Griggs, who won 57.4% of the vote, was backed by CUANM.

Not all of the wins on Tuesday were clear-cut primary victories, however. Changes to California's primary process mean that the top two finishers in each U.S. House and Senate primary race, regardless of party affiliation, will face each other this fall.

The biggest result in California for credit unions was credit union champion Rep. Brad Sherman's (D) first-place finish in California's 30th district, where the incumbent picked up 42% of the total vote. He will face fellow incumbent Howard Berman (D) this November.

Other successful CULAC-backed candidates in California included incumbent Sen. Diane Feinstein (D) and current House members Jeff Denham (R) and Brian Bilbray (R), as well as California House candidates Doug La Malfa (R), Jared Huffman (D), David Valadao (R), Tony Cardenas (D), Janice Hahn (D), Alan Lowenthal (D) and Juan Vargas (D).

Hawkins said CULAC will continue to support many of these credit union friends in this fall's election.

Matz highlights MBLs CU difference in iMarketWatchi

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WASHINGTON (6/7/12)--Credit unions provide a readily available funding source for businesses with loan demands that banks refuse to meet, and "generally have lower rates on loans than their competitors," National Credit Union Administration (NCUA) Chairman Debbie Matz noted in a recent MarketWatch interview.

Credit unions "make very small loans that frequently banks won't makep--the average loan is only about $230,000--for things like a day-care center or an auto repair shop. Sometimes banks are reluctant to make loans that small," Matz said. However, some credit union small business lending practices are being impacted by the 12.25% of assets member business lending cap, she said. The NCUA supports credit unions that "want to lift the cap and help communities create jobs," Matz added.

Credit unions' nonprofit, member-owned business model results in rates that are more favorable than bank rates "on almost every metric," and Matz noted that credit unions return their profits to members by lowering rates on loans and raising rates on deposits, with average credit card rates of 11.64%, below the 13.22% average bank rate. New three-year car loan rates average 3.7% at credit unions, lower than the 5.47% bank average rate, Matz added.

She emphasized that credit unions "provide services to people of all walks of life." And though credit unions were created to provide credit to people of modest means, anyone can now join a credit union. "It used to be you had to belong to a certain group but many serve anyone in a particular community. It's become much easier to join one," Matz said.

Reaching new members is a must for credit unions if they want to be around in 10 or 20 years, Matz said, and she again encouraged credit unions "to make sure services can be accessed from anywhere, anytime, through mobile devices, and that they can make loans on the spot."

More credit unions are starting to understand the need for mobile services, she added.

The NCUA chairman also emphasized the safe business practices of many credit unions, noting that credit unions are not allowed to engage in the kind of risky business practices that recently created issues for J.P. Morgan. "Credit unions operate within a very narrow margin on derivatives and only as hedges on interest rates. Right now, only seven credit unions are piloting plain vanilla derivatives. It takes an incredible amount of expertise so we're treading cautiously," she said.

While other financial regulators may move to address the issues brought to light by J.P. Morgan's missteps, the NCUA is unlikely to react by changing credit union regulations, Matz said. However, she did detail some of the NCUA's recent regulatory work, noting that the agency is examining all of its current regulations "to see where changes should be made to avoid duplication and streamline."

For the full interview, use the resource link.

House panel told of CFPB CARD Act credit-access plans

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WASHINGTON (6/7/12)--The Consumer Financial Protection Bureau (CFPB) is continuing its review of the impact that ability-to-pay rules imposed by the Credit Card Accountability Responsibility and Disclosure (CARD) Act are having on the ability of some consumers to obtain credit, and could address these credit access issues as soon as this summer, CFPB Associate Director Gail Hillebrand said.

Hillbrand testified before a Wednesday House subcommittee on financial institutions and consumer credit hearing entitled "An Examination of the Federal Reserve's Final Rule on the CARD Act's 'Ability to Repay' Requirement."

The ability-to-pay rules, which are now part of Regulation Z, require a card issuer to consider a consumer's independent ability to make required payments on a credit card account before opening a new card account or increasing the credit limit on an existing account. Outside of community property states, a card issuer may not rely solely on household income provided by an applicant on a credit card application, but will need to obtain additional information about the applicants independent income. Information concerning the applicant's income or salary, however, may be relied on in order to determine whether the applicant has the ability to make the required payments.

The CFPB last December reached out for public comment on any issues that the ability-to-pay rules were creating for lenders and borrowers, and the comment period ended on June 4. The agency is reading through those comments at this time, Hillebrand said.

Legislators last year contacted the CFPB, noting that the ability-to-repay rules were in some cases limiting the ability of stay-at-home spouses to secure new lines of credit and asking the CFPB to investigate the issue. The Credit Union National Association (CUNA) backed the call for a CARD Act study.

In prepared testimony delivered on Wednesday, Hillebrand said the agency is examining how it can "mitigate the risk that stay at home spouses might be denied credit that they can, in fact, afford to repay," and is considering how CFPB guidance could address this and other issues created by the ability-to-repay rules.

She noted that household income that is deposited into joint accounts "is legally available to both account holders, and may be considered in determining the ability of either one of them to repay a loan." However, the ability-to-repay rule, as currently written, does not currently specifically address joint accounts or checking accounts, instead only advising card issuers to "take into account assets such as savings accounts" when it determines an individual's creditworthiness.

For more on the hearing, use the resource link.

Inside Washington (06/05/2012)

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  • WASHINGTON (6/6/12)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund Tuesday posted comments it has received on its CDFI Program Application. The CDFI Fund this year asked for comment on how the application could be improved, how matching fund documentation could be collected, and other issues…
  • WASHINGTON (6/6/12)--The U.S. Treasury's Go Direct program announced it has changed the Web address for its Online Enrollment System homepage. Go Direct maintains separate sites for financial institution representatives and corporation and institutional representatives, and the current home pages for each of these sites will be deactivated on June 8. The new Web addresses can be found here and here… .

Small CU issues are NCUA listening session focus

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SAINT LOUIS, Mo. (6/6/12)--The many challenges faced by smaller credit unions took center stage at the National Credit Union Administration's (NCUA) Tuesday listening session.

Regulatory burden is an issue for credit unions of all sizes, and NCUA Director of Examinations and Insurance Larry Fazio noted that regulatory burdens can be exponentially more difficult for small credit unions to deal with, since they must comply with essentially all the same regulations as larger credit unions.

Local credit union attendees at the St. Louis session aired their concerns over the increasing trend of small credit union mergers. Bill Myers, director of the NCUA's Office of Small Credit Union Initiatives, said there are three reasons that small credit unions fail: fraud; lack of succession planning; and shrinkage.

NCUA staff said that eligible credit unions across the country will soon be notified of their Low Income Credit Union (LICU) designation status, and those credit unions, once they are contacted through an NCUA letter, will need only to accept or decline that LICU status. Credit unions were previously required to file applications and other relevant information with the NCUA before their LICU status could be denied or granted.

Overdraft fees, interchange, member business lending and related waivers, the NCUA's pending loan participation proposal, and the agency's recent decision to eliminate its regulatory flexibility rule and extend similar management and investment rights to all credit unions were also discussed during the meeting.

Credit union examination issues were also discussed during the session, and exam issues have been a consistent theme throughout the listening sessions.

The agency's work with other federal regulators, risk management, and National Credit Union Share Insurance Fund premium assessments were among the topics addressed at earlier listening sessions.

Additional sessions are planned for:

  • June 13 in Orlando, Fla.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
The sessions are scheduled to be held between 1 p.m. and 4 p.m. Registration is limited to the first 150 reservations, but the agency is still accepting registrants for all three of the remaining meetings.

The Credit Union National Association and league officials are planning to attend all sessions to hear what credit unions raise as well as the NCUA's responses, and will follow up with its Examination and Supervision Subcommittee and the NCUA on key issues brought up during the sessions.

For more on the sessions, use the resource link.

Compliance What does RegFlex end mean

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WASHINGTON (6/6/12)--What the National Credit Union Administration's (NCUA) decision to eliminate the regulatory flexibility (RegFlex) program means for federal credit unions is one of the many issues tackled in the June edition of the Credit Union National Association's (CUNA) CompBlog Monthly Wrap-Up.

The NCUA last month voted to eliminate the RegFlex program, extending the enhanced management and investment rights offered under the program to the 1,770 credit unions that were not covered under the RegFlex designation. While the good news is this move eliminated a regulation, CUNA staff noted that NCUA examiners may not be tolerant of financially troubled credit unions that make charitable donations.

The CompBlog Wrap-Up also cautions credit unions that, although they may be exempt from the NCUA's new interest rate risk (IRR) management rule, they should still be prepared to answer IRR questions from examiners. Credit unions that are writing IRR policies for the first time will find some ideas on how best to get started.

Other issues addressed in this month's Wrap-Up include:

  • The Consumer Financial Protection Board's continuing work on mortgage forms and regulations;
  • Recently introduced legislation that would address ATM disclosures, credit relief for servicemembers, and consumer privacy disclosures; and
  • Regulation E changes that could impact prepaid cards.
Information on an upcoming CUNA audio conference on compliance issues and new training programs is also provided in the Wrap-Up.

For more of CUNA CompBlog's Monthly Wrap-Up, and other compliance gems, use the resource links.

Put it on the map NCUAs CU data by state

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ALEXANDRIA, Va. (6/6/12)--Arizona is leading the way in average return-on-assets (ROA) for the nation's credit unions, the National Credit Union Administration (NCUA) revealed in a new quarterly state-by-state review of the financial performance of credit unions.

The new state-by-state breakdown of key financial indicators is a new format for the agency. Released Tuesday, the review features chart- and map-based presentations of the average ROA, annualized loan growth and delinquent loan percentages of credit unions in each state. Information on each state's share of credit unions with positive return on average assets is also included.

NCUA Chairman Debbie Matz said the quarterly U.S. map review "is part of an ongoing effort by NCUA to provide timely, easy-to-use analysis of credit union data to the public."

The map highlights the diversity of credit union performance across the nation, reflecting local economic conditions, specific state strengths, and current challenges, and can help credit unions make better decisions and give the public a greater understanding of how credit unions are performing, she added.

The latest data are drawn from 2012 first quarter call reports.

Arizona's 123 basis point (bp)quarterly average ROA is closely followed by Virginia's total of 121 bp. Iowa, North Dakota and Alaska are not far behind, with ROA averages of 112, 109 and 106, respectively. ROA increased for credit unions in 40 U.S. states and territories between the first quarters of 2011 and 2012, the NCUA added. New Jersey, North Carolina, Nevada, West Virginia and Rhode Island all average ROA below 50 bp during the first quarter, the NCUA reported.

New Hampshire's average credit union loan delinquency rate of 0.49% was the lowest in the nation, while Montana, at 3.23%, had the highest average rate during the quarter. Delinquency rates in 41 states fell when compared to last year's numbers, according to the report.

Overall, the NCUA said most state-level credit union metrics are experiencing a recovery, but "credit union performance varies widely across the country." Mid-American states are experiencing the strongest recovery, "while states in the West and Mid-Atlantic tend to lag behind the rest of the country in performance," the NCUA said. Loan growth for North Dakota's credit unions averaged 12.16%, the highest of any state, while loan volume at Nevada's credit unions declined by 11.05% during the quarter.

The agency said in a release that the state-level financial indicators are compiled as state aggregate averages--"essentially asset-weighted averages for the state." Credit unions are assigned to each state by the location of their home office or headquarters, the NCUA added, and the agency release stressed that state averages would not necessarily reflect the performance of individual credit unions in each state.

CFPB schools work to address student debt

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WASHINGTON (6/6/12)--Six colleges and four state university systems this week agreed to work with the government to provide key financial information, up front, to incoming students, and Vice President Joe Biden, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and Secretary of Education Arne Duncan on Tuesday urged all colleges and universities to provide the same information to their students.

Cordray in a prepared statement delivered during a Tuesday press conference said his agency has received thousands of comments from students that are "in over their heads" after taking out private student loans to cover their college costs.

The CFPB director said the process of figuring out how to pay for college can be "complex and confusing," and many factors make it difficult for students "to clearly see and compare college costs, evaluate financial aid options, and figure out how much debt they can afford."

Vassar College, Miami Dade College, Arizona State University, Syracuse University, North Carolina Agricultural & Technical State University, and the University of North Carolina joined the state university systems of Maryland, Massachusetts, New York and Texas that have agreed to provide incoming student information on:

  • The cost of one year of college at their institution;
  • Financial aid options to repay this cost;
  • How grants and scholarships could help minimize educational costs;
  • The estimated monthly payments students will need to cover after they graduate; and
  • Returning student enrollment rates, graduation rates, and loan repayment rates.
The schools and systems will provide this information beginning in 2013.

The Credit Union National Association estimates that around 300 credit unions currently offer student loans to their members, and those credit unions often provide loans with terms and interest rates that are fair to their members. Credit unions also provide financial education and seminars relating to student lending generally, and encourage students to attend. The CUStudentLoans.org website also provides extensive financial education regarding student lending, through both written information and webinars. The site is powered by Fynanz, a CUNA Strategic Services provider.

The CFPB is working with the U.S. Department of Education on a "Know Before You Owe" project to help borrowers, including student borrowers, understand debt implications, and is studying the private student lending market. A report on that market is expected to be released this summer.

The CFPB and Department of Education are also developing a financial aid shopping sheet for prospective students, and comments on that sheet will be accepted until June 20.

For more on the CFPB's student lending initiatives, use the resource link.

CU Champion Sherman among todays primary tests

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WASHINGTON (6/5/12)--With a combined 78 primary electoral contests set to take place today in California, Iowa, Montana, New Jersey, New Mexico and South Dakota, June 5 is a mini-Super Tuesday, and credit union advocates are key players in several close races, Credit Union National Association Vice President of Political Affairs Trey Hawkins notes.

One key race involves incumbent Rep. Brad Sherman (D-Calif.), who is facing fellow incumbent Rep. Howard Berman (D-Calif.) and five other opponents. Sherman has consistently championed many credit union legislative priorities, including maintaining their not-for-profit tax status, relieving regulatory burdens, increasing the member business lending (MBL) cap, and easing access to supplemental capital.

Hawkins said the Sherman race is "critical" to credit unions. The Credit Union Legislative Action Council (CULAC) and the California Credit Union League are both supporting Sherman, and the league is stepping up its efforts with in-district activities.

California's primary process has been tweaked this year, with the top two vote getters from each district, regardless of party affiliation, moving on to face each other in November's general election contests. CUNA political experts expect Sherman to be one of the top-two finishers in his district, and noted that the real race will take place in November.

CULAC and the league are also backing incumbent Sen. Dianne Feinstein (D) in her primary bid, and Feinstein is expected to lead the group of 24 candidates that are running for one of California's U.S. Senate seats.

California U.S. House primary candidates Doug La Malfa (R), Jared Huffman (D), David Valadao (R), Tony Cardenas (D), Janice Hahn (D), Alan Lowenthal (D) and Juan Vargas (D), and incumbent candidates Jeff Denham (R) and Brian Bilbray (R), are also among those facing competitive primaries that have received CULAC and league support in their respective general election contests.

Senate candidate Mark Heinrich noted that increasing credit union MBL authority would help boost the economy in a recent debate.
Potential U.S. Senate candidate and current U.S. House member Martin Heinrich (D) is also backed by CULAC and the Credit Union Association of New Mexico, and he noted his support for legislation that would increase the credit union MBL cap in a June 3 primary debate against fellow Senate candidate Hector Balderas (D). Heinrich added that the U.S. Congress could help create new jobs by opening such new financing opportunities for small businesses.

Heinrich leads Balderas by 25 points in a recent Albuquerque Journal polls, and is expected to face Republican Heather Wilson (R) this fall, the Journal reported. Wilson held Heinrich's current House seat before she left to mount an unsuccessful run for the U.S. Senate. Hawkins said this year's New Mexico Senate race should be competitive.

He noted there are many other credit union candidates running in other states, including current Sen. Jon Tester (D-Mont.), but they are all expected to win their nomination fights.

Regulators understanding meant to cut some burden

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WASHINGTON (6/5/12)--In a move that could minimize regulatory burdens for credit unions and other financial institutions with more than $10 billion in assets, the National Credit Union Administration, the Consumer Financial Protection Bureau (CFPB), the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency announced they would soon coordinate some of their supervisory and examination efforts.

The collaborative effort was made official in a recent Memorandum of Understanding (MOU).

The Federal Financial Institutions Examination Council (FFIEC), which is comprised of those regulators, said the MOU would help regulators establish arrangements for coordination and cooperation between the CFPB and the prudential regulators, minimize unnecessary regulatory burden, avoid unnecessary duplication of effort, and decrease the risk of conflicting supervisory directives.

Under the MOU, federal financial regulators will, in some cases, work together to schedule examinations and share draft reports of examinations, the FFIEC said. Regulators may also conduct simultaneous examinations of covered depository institutions, but financial institutions will have the ability to request separate examinations from their various regulators, the FFIEC added.

However, the Credit Union National Association (CUNA) said it is concerned by language in the MOU that would allow regulators to hold joint examinations, and share information gathered in those examinations, on a so-called "sampling basis."

For the full FFIEC release, use the resource link.

CUNA to CUs Emphasize payday program positives

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WASHINGTON (6/5/12)--Noting that the Federal Deposit Insurance Corp. (FDIC) is planning to investigate banks that offer payday loan products, Credit Union National Association General Counsel Eric Richard said credit unions offering similar products can guard against regulatory intrusion on similar products by ensuring that their programs are clearly distinguishable from others by virtue of their member-friendly features.

The Minneapolis Star Tribune recently reported the FDIC is concerned by news that banks are taking advantage of lower-income borrowers with questionable payday loan practices. Around 250 pro-consumer groups wrote the FDIC earlier this year, asking the regulator to prevent big banks "from trapping their customers in long-term debt at 400 percent annual interest," the Star Tribune said.

FDIC spokesman Andrew Gray told the Star Tribune his agency has "long-standing guidance related to payday lending and has encouraged banks to offer small dollar short-term loans on a responsible basis."

Most credit unions offering payday loan alternatives appear to have included interest rate restrictions, limited fees, member financial counseling, or other positive features of credit union short-term small amount loans, Richard said. Many credit union programs also encourage members to open savings accounts and provide incentives for members that switch to longer-term and lower-cost lending products, he added.

The National Credit Union Administration currently allows federal credit unions to offer short-term small amount loans to their members as an alternative to predatory payday loans that are offered by other financial service providers. Federal credit unions may charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. A $20 application fee may also be charged. The loans may total as high as $1,000 and may last for as long as six months, and the loans cannot be rolled over.

In Congress Hearings include CARD Act housing

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WASHINGTON (6/5/12)—A House subcommittee on financial institutions and consumer credit hearing on implementation of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act is one of many items credit unions will want to keep an eye on as the U.S. House and Senate work through this week.

The CARD Act hearing, entitled "an Examination of the Federal Reserve's Final Rule on the CARD Act's 'Ability to Repay' Requirement," is scheduled to be held on Wednesday afternoon. A witness list had not been released as of late Monday.

A Thursday House Financial Services subcommittee on insurance, housing and community opportunity hearing will also be of interest to credit unions. That hearing will focus on the Federal Housing Administration's multi-family housing programs. That hearing will feature testimony from Deputy Assistant Secretary Marie Head, National Housing Trust President Michael Bodaken and National Low Income Housing Coalition CEO Sheila Crowley, among others. AmeriSphere CEO Rodrigo López is also scheduled to testify on behalf of the Mortgage Bankers Association.

The House Financial Services Committee will has also scheduled a Wednesday hearing. That panel will review the Investment Adviser Oversight Act (H.R. 4624), which would provide for the registration and oversight of national investment adviser associations, on the schedule. Investor issues will again be addressed on Thursday in a House capital markets subcommittee hearing. The House Small Business Committee has scheduled a Wednesday hearing on the management of the Capital Access Program by the Small Business Administration.

A Wednesday Senate Banking Committee hearing on derivatives regulations is also scheduled. That hearing will focus on the steps the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission are taking to implement provisions of the Dodd-Frank Wall Street Reform Act, and their efforts to reduce systemic risk and improve market oversight. The session also will review the $2 billion J.P. Morgan Chase trading loss, which is being investigated by federal authorities.

The Paycheck Fairness Act (S. 3220) will be considered by the Senate this week, and various appropriations bills will be addressed by the House.

House members will return to their home districts until June 18 at the end of this week, but the Senate will remain in session.

Inside Washington (06/04/2012)

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  • WASHINGTON (6/5/12)--Former U.S. Sen. Christopher Dodd (D-Conn.) said Thursday that JPMorgan Chase's (JPM) estimated $2 billion trading loss supports the case that Congress must enact legislation to prevent large banks from taking excessive risks. Specifically, the Dodd-Frank Act, which Dodd co-wrote with Rep. Barney Frank (D-Mass.), includes a provision that would implement the so-called Volcker Rule, which would put restrictions on banks' proprietary trading (American Banker June 4). Dodd now heads the Motion Picture Association of America. In April, a group of 22 senators in a letter called on regulators to meet the July 21 deadline to write the rule (News Now April 27).  The letter lists specific issues with the proposed Volcker Rule, but asks that it not be delayed or scrapped. It urges lawmakers to eliminate loopholes; draw clear lines based on objective data and observable markets; strengthen CEO and board-level accountability and public disclosure; and provide coordinated and consistent enforcement, including data sharing by regulators …
  • WASHINGTON (6/5/12)--Financial industry representatives Friday urged lawmakers to pass a cybersecurity bill that would allow for more sharing of information between the private sector and the federal government (American Banker June 4). Greater public-private information exchange would allow financial institutions to enlist the federal government in tracing down hackers and their targets, supporters said. Sharing information about breaches would allow institutions to take action sooner and prevent fraud against their customers, said Paul Smocer, who heads the Financial Services Roundtable's technology policy division, at a House financial institutions subcommittee hearing. Democrats, including President Barack Obama, are concerned that the bill does not offer enough privacy protections. Credit unions are not expected to be affected by the legislation, said Ryan Donovan, Credit Union National Association senior vice president of legislative affairs
  • WASHINGTON (6/5/12)--The Office of Comptroller of Currency's (OCC) examination procedures during the period 2008 through 2010 were insufficient to identify weaknesses in national banks' foreclosure practices, the Treasury Department's Inspector General (IG) said in a report released Thursday. "OCC did not consider foreclosure documentation and processing to be an area of significant risk and, as a result, did not focus examination resources on this function," the report said. "The nature and extent of concerns found by OCC during its inter-agency horizontal review of mortgage foreclosure processes at major mortgage servicers indicate that OCC underestimated the level of risk in the function during the period we reviewed." The report recommended to increase examiner focus on operational risk in its examination planning; and determine whether a more specific coding of foreclosure related complaints would improve the agency's ability to identify  servicer problems. Treasury's IG also recommended OCC update and require regular review its Mortgage Banking Comptroller's Handbook …
  • WASHINGTON (6/5/12)--More than 30 Michigan credit union leaders flew to Washington last week for the Michigan Credit Union League's (MCUL) annual lobbying event (Michigan Monitor June 1). The MCUL held a luncheon featuring National Credit Union Administration Chair Debbie Matz. Also in attendance were Matz's Chief of Staff Steve Bosack and Senior Adviser Buddy Gill. The Michigan group also received a political briefing from senior Credit Union National Association (CUNA) government affairs representatives at CUNA's headquarters. The league hosted an evening reception on Capitol Hill at the Credit Union House, where Rep. Fred Upton (R-St. Joseph) made a special candidate appearance with credit union leaders. On Thursday, credit union leaders headed to Capitol Hill for office visits with representatives Michigan's 17 U.S. House and Senate member offices. Credit union leaders discussed legislation to raise the credit union member business lending cap, increase credit union access to supplemental capital, and to eliminate unnecessary ATM disclosures. Rep. Dave Camp (R-Midland) who currently serves in leadership as chairman of the Ways and Means Committee signed on as a co-sponsor of H.R. 3993, legislation to permit credit unions access to supplemental forms of capital. Also, Reps. Dale Kildee (D-Flint) and Sander Levin (D-Royal Oak) signed on as co-sponsors of H.R. 4367, legislation to eliminate the physical fee disclosure requirement on ATMs. Pictured from left Kieran Marion, MCUL; Dave Brandt, E&A CU, Port Huron; Charles Canvasser, EECU Community CU, Jackson; Phil Matous, Total Community CU, Taylor; Justin Bamford, Muskegon (Mich.) Co-Op FCU; Don Yuvan, Eaton County Educational CU, Charlotte; Phyllis White, and Melissa Zylema, St. Joseph Mercy Hospital Pontiac (Mich.) FCU. Five other states will visit Capitol Hill this week: Maine, Kansas, Oregon, Washington and Oklahoma. (Photo provided by Michigan Credit Union League) …

Premier CU buys Telesis after NCUA liquidation

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ALEXANDRIA, Va. (6/4/12)--Premier America CU of Chatsworth, Calif., on Friday purchased and assumed the assets of close neighbor Telesis Community CU after Telesis was liquidated by the National Credit Union Administration (NCUA).

The California Department of Financial Institutions placed Telesis into liquidation, and appointed the NCUA as liquidating agent, on Friday. Telesis was taken under conservatorship by its state regulator on March 23.

The credit union was liquidated after California credit union authorities determined it was insolvent, and could not return to operational status.

Premier currently holds $1.3 billion in assets from 64,000 members.

Premier will assume the 37,600 members and $301.3 million in assets, core facilities, and consumer loans once held by Telesis, and the NCUA noted that member shares will remain fully insured to the maximum National Credit Union Share Insurance Fund amount of $250,000.

The NCUA last week also approved the merger of Montana First CU and Horizon CU.

CUNA News Now will have more on this and other approved mergers in a roundup story this week.

Inside Washington (06/01/2012)

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  • WASHINGTON (6/4/12)--The House Financial Services Committee on Thursday passed a bill that would push back the date by which banks needed to be under $15 billion in assets to avoid the new capital requirement under the the Dodd Frank Act. The bill, sponsored by Rep. Michael Grimm (R-N.Y.), specifically benefits New York City's Emigrant Bank, which received a $2.3 billion advance from the Federal Home Loan Bank of New York during the financial crisis (American Banker June 1). The loan temporarily pushed Emigrant's total assets over $15 billion--the threshold at which banks are subject to a provision of the Dodd-Frank Act that prevents them from counting trust preferred securities as part of their Tier 1 capital. The Dodd-Frank Act set the cut-off date for the threshold as Dec. 31, 2009. The bill would push that date back by three months and allow Emigrant to avoid the restrictions …
  • WASHINGTON (6/4/12)--Jamie Dimon, JPMorgan Chase & Co.'s chairman and chief executive officer, will field questions about his company's $2 billion trading loss from the Senate Banking Committee on June 13. The committee had earlier announced Dimon would testify on June 7 (American Banker June 1) …

NCUA confirms CU assets hit 1 trillion mark

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ALEXANDRIA, Va. (6/4/12)--Consistent with numbers that were released by the Credit Union National Association (CUNA) early last month, the National Credit Union Administration (NCUA) late last week reported that the total amount of assets in the credit union system crossed the $1 trillion mark in the first quarter of 2012.

The total number of federally insured credit unions fell to 7,019 from 7,094 during the quarter, but a record 92.5 million members belonged to a credit union as of March 31, the NCUA added. Credit unions added 667,000 new members in the first quarter of 2012.

CUNA President/CEO Bill Cheney said the credit union membership growth that began in the fall of last year "seems to have a 'tail' to it, as more and more consumers are realizing the value in credit union membership. This new-member growth likely also helped propel credit unions past the milestone of $1 trillion in total assets," Cheney added.

The NCUA quarterly report showed that the credit union industry netted nearly $2.1 billion in income during the quarter, an increase of $369.6 million from the prior quarter's total. The NCUA also reported that:

  • Member total savings increased 4.7% during the quarter, totaling $866 billion;
  • Credit union investments, cash on deposit, and cash equivalents increased 11.2% during the quarter, totaling $391.6 billion; and
  • Total loans increased 0.1% during the quarter, totaling $572 billion.
Credit unions' return on assets (ROA) ratio stood at 84 basis points (bp) as of March 31, a 17-bp increase from the total reported at the end of 2011. Overall, the credit union industry's ROA ratio has grown by 66 bp since December 2009, the NCUA noted. (See related story, "CUs' annualized ROA on fastest pace since 2006," in News Now's System section.)

Net worth exceeded $100 billion during the same quarter, the agency reported, and both of these marks represent important milestones for the credit union industry, NCUA Chairman Debbie Matz said.

Share drafts, regular shares, and money market funds held at credit unions increased by 11.4%, 8.3%, and 3.8%, respectively, the NCUA reported. Credit unions' overall delinquency ratio dropped to 1.44% during the quarter, a 16-bp decline from the previous quarter's total, and the net charge-off ratio fell 13 bp, totaling 0.78%.

Loan growth at credit unions continued for the fourth straight quarter, increasing by $532.5 million to total $572 billion at the end of the quarter. Member business lending at credit unions increased by 1.4% during the quarter, the NCUA added.

"By year's end, we expect credit unions will have grown even stronger, as lending picks up, return on assets remains steady and net worth pushes even higher," Cheney said.

CUNA to CFPB Consider exempting CUs in rulemaking

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WASHINGTON (6/4/12)--The Credit Union National Association (CUNA) urged the Consumer Financial Protection Bureau (CFPB) to consider exempting credit unions from agency rulemakings, and to address remittance transfer, overdraft protection and mortgage and mortgage-related regulations as it looks for ways to streamline existing financial rules.

"While the CFPB has been tasked by Congress to implement 18 laws and assume other duties, the agency was also given broad authority to minimize the compliance burdens of its rules on entities such as credit unions…The role of the CFPB in alleviating compliance burdens for institutions that are already heavily regulated is as important as its responsibility to develop and implement regulations for entities that, prior to the establishment of the CFPB, escaped meaningful government oversight," CUNA Deputy General Counsel Mary Dunn said in a Friday comment letter.

The letter focused on concerns in three major areas: remittance transfers, overdraft protection, and mortgage and mortgage-related regulations.

"Since the inception of the CFPB, CUNA has strongly supported the objective of protecting consumers from unscrupulous service providers but credit unions are more concerned than ever that the agency will impose an endless range of new requirements and data collection responsibilities on the most scrupulous service providers in the marketplace: credit unions," the letter said.

CUNA suggested the CFPB could also minimize all reporting requirements under Dodd-Frank, including those regarding gender, minority status, credit scores, points and fees, for smaller institutions.

The CFPB also should do a better job of estimating the amount of funds and resources that credit unions and other institutions will need to dedicate to comply with new rules, CUNA said in its letter. Any new proposals or final regulations should include executive summaries and charts that demonstrate how the proposed changes would impact existing rules. The CFPB should also lay out how its rules have been changed between the proposed and final stages.

Financial institutions should be given the time needed to comply with any regulatory changes that are approved by the CFPB, and the CFPB should clearly delineate between a rule's effective date and any mandatory compliance date(s), CUNA said.

The agency should also create a standard review period for all rulemakings, the letter added.

For the full CUNA comment letter, use the resource link.

CUNA seeks CU comment on ACH data proposal

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WASHINGTON (6/4/12)--NACHA-The Electronic Payments Association has issued a new proposal that would improve the security and integrity of some forms of automated clearing house (ACH) data, and the Credit Union National Association (CUNA) has asked credit unions to weigh in on the proposal in a new comment call.

NACHA's ACH security framework proposal would require credit unions and other financial institutions and groups that take part in ACH transactions to protect the confidentiality and integrity of certain sensitive consumer information, and to prevent third parties from accessing that information.

Credit unions and others that handle ACH data also would need to verify, as part of their yearly ACH Rules Compliance Audits, that they have established, implemented, and updated data security policies, procedures and systems to comply with the proposed security requirements under the NACHA proposal.

The proposal would require originating depository financial institutions (ODFI) to verify the identity of all ACH transaction originators and third-party senders, regardless of the manner in which the origination agreement was executed. Currently, this ODFI verification requirement only applies to originators or third-party senders that enter into an origination agreement via an unsecured electronic network.

The proposed NACHA rule changes are scheduled to become effective on Sept. 20, 2013.

In the comment call, CUNA asks credit unions to describe how the NACHA proposal could impact their risk management and ACH compliance procedures.

Credit unions can also comment on the proposed compliance date and how the rules could create new compliance costs.

NACHA will accept comments until June 22. Credit unions should forward their comments to CUNA by June 11.

For the full comment call, use the resource link.