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CUNA: Corporate Assessments Should End If Current Trends Continue

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ALEXANDRIA, Va. (7/26/13)--The National Credit Union Administration approved a corporate stabilization fund assessment of eight basis points (bp) at yesterday's board meeting after reporting on strong performance of the corporate legacy assets. CUNA Chief Economist Bill Hampel believes future assessments may not be necessary, based on that performance as well as housing and economic trends.

Click to view larger image CUNA's Bill Hampel, right, talks assessments and budgets with the NCUA's Larry Fazio following Thursday's open board meeting. (CUNA Photo) 
"This year's assessment amount of about $700 million could well be sufficient to cover the remaining losses on the legacy assets acquired from the five failed corporate credit unions," said Hampel. "If this is the case, a 2014 assessment may well be unnecessary and therefore unlikely."

Both NCUA Chair Debbie Matz and board member Michael Fryzel asked NCUA Director of Examination and Insurance Larry Fazio if the assessment could have been lower than 8 bp based on the strong performance of the assets. Fazio maintained that market conditions could still change and that the NCUA is focused on paying down the $4.7 billion line of credit from the U.S. Treasury Department.

After the payment is made, outstanding borrowing to the Treasury will total no more than $4.075 billion, agency staff said. Paying down the credit line builds a cushion for emergency liquidity needs the agency or share insurance fund might encounter. In the past, the Central Liquidity Facility (CLF) provided access to large amounts of emergency liquidity to the NCUA, but in its present form, the CLF no longer serves that purpose.

"Unfortunately, the timing of the assessments is being driven by factors other than actual losses or the latest estimates of losses to be covered. It is clear that the assessment decision was based more on liquidity concerns than on loss estimates," said Hampel.

The range for 2014 corporate assessments will be set in November, NCUA's Matz said.

Hampel also questioned the NCUA's decision to cover almost all of the losses of corporate stabilization in just the first five years of what could have been a 13-year program. "Because many of the remaining losses won't actually be realized until a few more years into the future, it would have been preferable for the timing of the assessments to more closely correspond to the timing of the realization of the losses. That also would have smoothed the effects of the assessments on credit union income statements."

CU E-filing Could Be Required

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ALEXANDRIA, Va. (7/26/13)--A proposed rule that would require all federal credit unions to electronically file their financial, statistical and other reports was approved by the National Credit Union Administration on Thursday.

If the rule is adopted, the reports would have to be filed using the agency's information system or other means specified by NCUA. Manual filing would no longer be an option, the NCUA said.

A computer with internet access, and an e-mail address, is all that would be needed to comply with this rule, the agency stressed.

The proposed e-filing rule will be released for a 30-day comment period.

The agency today also proposed an Interpretive Ruling and Policy Statement addressing a minority credit union preservation program. Under the program, credit unions with high percentages of minority members and management (50% and above) would be eligible to receive minority credit union status from the agency.
This status would grant them access to NCUA Office of Small Credit Union Initiatives resources, including grant program eligibility.

The goal of the program, which is mandated by the Dodd-Frank Act, is to promote and preserve minority ownership in the credit union industry. The program should not create any new burdens or requirements for credit unions.

The agency also approved San Francisco FCU's application to expand its service area to persons and businesses in San Francisco and San Mateo counties. The community chartered credit union currently has 31,000 members and holds $832 million in assets.

Quarterly National Credit Union Share Insurance Fund statistics were also reported during the meeting.

The agency reported a total of nine credit union liquidations as of June 30, an increase from the four reported in the first quarter of 2013.

The total number of CAMEL code 3, 4 and 5 credit unions fell to 1,838 in the second quarter, down from the first quarter total of 1,897.

In total, the NCUSIF ended the second quarter of 2013 with $103.2 million in net income and an equity ratio of 1.27%.

For more NCUA meeting results, use the resource link.

NCUA Reduces 2013 Spending Plan

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ALEXANDRIA, Va. (7/26/13)--The National Credit Union Administration Thursday approved changes to its 2013 operating budget, reducing that budget by $2.6 million.

The $2.6 million savings will help offset costs of the 2014 budget, the NCUA said. 

The budget decrease brings the total 2013 budget to $248,811,780. This is the fourth mid-year budget decrease the agency has approved. 

The agency is also holding employee base salaries at their current levels, in voluntary compliance with the federal pay freeze. The agency had planned $9.1 million in 2013 salary and benefits.

The decrease to the operating budget is primarily due to a $6.3 million net decrease in pay and benefits, but the NCUA board did agree to a $3.6 million one-time lump sum payment to eligible employees.

The one-time payment will average 3% of eligible employee's salaries.

NCUA said this action was necessary because under the Federal Credit Union Act, the agency's pay scale must be comparable to that of other federal financial regulators. NCUA salaries have not kept pace with those of other regulators, the board noted.

The Credit Union National Association has encouraged the agency to hold itself to the same standards of containing costs that credit unions are held to by their examiners--including on conditional pay increases for employees. 

"While credit unions are performing well financially, they are still working hard to contain costs, and many are being instructed by examiners to do even more to watch their expenses, including salary increases. Credit unions believe NCUA should be held at least to similar standards," CUNA President/CEO Bill Cheney said. 

In adopting its 2013 budget last fall, the agency noted the U.S. Congress had not yet approved a federal employee pay increase, and indicated that NCUA would not expend $9.1 million it had set aside for a conditional pay increase. Congress has still not approved a federal budget, and CUNA has urged NCUA to continue holding off this expenditure until that approval occurs.

CUNA has also suggested that NCUA:
  • Consider providing even more information about its budget, such as detailing cost increases per employee for the fiscal year; and
  • Contain costs related its proposal on derivatives, which includes additional costs to credit unions of implementing the program of between $6 million and $11 million.

FHFA Reaches $885 Million MBS Settlement

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WASHINGTON (7/26/13)--The Federal Housing Finance Agency (FHFA), in its role as conservator of the two government-sponsored housing enterprises, Fannie Mae and Freddie Mac, announced Thursday that it has reached a settlement with UBS Americas Inc. for $885 million.
The FHFA said the settlement covers claims of alleged violations of federal and state securities laws in connection with private-label residential mortgage-backed securities (RMBS) purchased by Fannie and Freddie.
FHFA said UBS will pay approximately $415 million to Fannie and $470 million to Freddie to resolve certain claims related to securities sold to the companies between 2004 and 2007.
"The satisfactory resolution of this matter provides greater clarity and certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae's and Freddie Mac's assets on behalf of taxpayers," said FHFA Acting Director Edward DeMarco.
The settlement agreement covers claims between FHFA and UBS in the following cases: FHFAv. UBS Americas, Inc., et al., 11 Civ. 5201 (DLC) (S.D.N.Y.); FHFA v. Ally Financial Inc., et al., 11 Civ. 7010 (DLC) (S.D.N.Y.); FHFA v. Countrywide Financial Corp., et al., No. 12 Civ. 1059 (MRP) (C.D. Cal.); FHFA v. First Horizon National Corp., et al., No. 11 Civ. 6193 (DLC) (S.D.N.Y.).

The settlement is between FHFA and UBS Americas Inc., UBS Real Estate Securities Inc., UBS Securities LLC, Mortgage Asset Securitization Transactions Inc., and other named defendants, according to the agency.
FHFA has now settled three of the 18 suits it filed in 2011, and remains committed to satisfactorily resolving the remaining suits as well.