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CU System Briefs (07/29/2013)

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  • WASHINGTON, D.C. (7/29/13)--The Consumer Financial Protection Bureau's (CFPB) recent amendments to clarify the Ability-to-Repay and mortgage-servicing rules, proposed in April and finalized earlier this month, have been published in the Federal Register. The clarifications are meant to address questions that were posed in the months since the rules were first issued in January. CFPB Director Richard Cordray has said that the bureau is "listening closely to feedback" on its rules and these clarifications "show our willingness to make appropriate adjustments" ...
  • LAREDO, Texas (7/29/13)--A former Laredo (Texas) FCU employee, who pleaded guilty to robbing the credit union of $177,000 at gunpoint on Jan. 6, 2012, was sentenced to more than 10 years in prison Thursday in a U.S. District Court in Laredo (Laredo Morning Times July 25).  Asael Cruz's sentence will be followed by a five-year supervised release and150 hours of community service. He will pay more than $7,689 in restitution to the credit union and a custodian whose truck was stolen for the getaway.  The robbery occurred when the suspect confronted a teller who was exiting the building by a rear door. Cruz allegedly pointed a handgun at the victim and ordered him to stay on the floor face down. When the teller couldn't provide a combination to the door, Cruz allegedly grabbed the employee's wallet, checked his driver's license, and called him by name, saying he would keep the license in case anything "goes bad." He bound he man's wrist, ankles and mouth with tape before robbing the credit union ...
  • BELMONT, Calif. (7/29/13)--Belmont, Calif., police arrested Carmen Joseph Polito, 31, a transient, Wednesday in connection with a robbery of Redwood City-based Provident CU Tuesday. Polito was arrested as he walked along a city street. At about 2:30 p.m. Tuesday a man entered the credit union and handed a teller a note demanding money. The teller gave him money from the cash drawer and Polito repeated the process with a second teller, this time demanding the money verbally before fleeing with the money, said Redwood City police. Police recovered money and a demand note during the arrest (CBS San Francisco July 26 and Belmont Patch July 25) ...
  • PORTLAND, Maine (7/29/13)--Richard "Spike" Carey, former long-time director of Waterville, Maine-based New Dimensions FCU, died July 19, according to the Maine Credit Union League (Weekly Update July 29). Carey also served in the Maine Legislature for many years, where he was known as a strong friend of credit unions, the league said. Carey also served as mayor of Waterville in the 1970s ...

NEW: N.C. Governor Signs League-supported Elderly Abuse Law

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RALEIGH, N.C. (7/29/13 UPDATED 2:25 p.m. ET)--North Carolina Gov. Pat McCrory has signed into law Senate Bill 140, a league- and credit union-backed bill that enhances efforts by the state's financial institutions to prevent the exploitation of older adults.

"Fraud committed against the elderly is on the rise, and North Carolina's credit unions want to do more to protect seniors," said Lauren Whaley, director of legislative and regulatory affairs at the North Carolina Credit Union League.
 
"This legislation will give credit unions more responsibility to detect and halt fraudulent transactions and at the same time, credit unions could decide what best practices for curbing elder financial abuse are most suited for their membership, Whaley said. 
 
"The league was very engaged in the legislative process to ensure the bill passed this session," she said, adding that it already is planning a training resources workshop with the Consumer Financial Protection Bureau, North Carolina Bankers Association and the state Attorney General's Office.
 
The call for the legislation was a cooperative effort between the league, attorney general's office, State Employees' CU and the bankers association, said the Raleigh-based SECU, the state's largest credit union with $26 billion in assets.
 
The Financial Exploitation of Older Adults law increases the recognition, reporting and prosecution of those who would defraud older or disabled adults by facilitating the collection of records needed to investigate and prosecute scammers.
 
It requires all financial institutions in the state to report to appropriate authorities cases where there is reasonable cause to believe that a disabled adult over 18 or adult 65 or older is the victim or target of financial exploitation, said SECU. The law ensures that no financial institution employee or officer acting in good faith when making a report may be held liable. It also encourages financial institutions to offer older adult members the opportunity to submit a list of trusted persons to be contacted in case of financial exploitation.
 
SECU said it has an emergency contact service in place for members 60 years or older. Other services it offers older members include reverse mortgages, tax preparation services, estate planning essentials program, and a resource library that cover topics such as health care, Social Security, and powers of attorney.

CUNA, CUs Participate In Freddie's Credit Risk Sharing Meeting

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McLEAN, Va. (7/29/13)--Freddie Mac Friday announced that a new synthetic type of agency mortgage-backed security (MBS) that could decrease taxpayer exposure in the mortgage market was ready for trading. The Credit Union National Association was present and participated in the briefing to ensure that credit unions were represented.
 
The $500 million offering of Structured Agency Credit Risk (STACR) Debt Notes, Series 2013-DN1, was priced Tuesday and scheduled to settle Friday. STACR debt is the first in a series of such offerings. The securities would, in essence, offload a portion of the risk of certain government-guaranteed MBS into the investors in private capital markets. The STACR bonds, originally scheduled to be $400 million but increased to $500 million due to investor demand, were purchased by a number of investors, including credit unions, according to Freddie Mac.
 
"This is a novel structure for mortgage-backed securities that could reduce the taxpayer's exposure and risk," said Robin Cook, CUNA assistant general counsel for special projects. "It is an interesting way to bring more private capital into the mortgage marketplace without legislation."
 
STACR debt notes are different than other Freddie Mac securities and debt issuances. Under the STACR structure, the amount of periodic principal and ultimate principal paid by Freddie is determined by the performance of a large and diversified reference pool of more than 96,000 loans, representing a $22.5 billion residential mortgage loan balance. This pool consists of a subset of 30-year, fixed-rate, single-family mortgages acquired by Freddie Mac in the third quarter of 2012.
 
Freddie retains control of the servicing of the loans in the reference pool, which allows the loans to follow Freddie's loss mitigation practices and programs. Freddie also retains a share of losses on every loan in the reference pool, ensuring that its incentives are aligned with investors.

"Treasury believes these efforts are an important step to increasing private sector participation in the housing finance sector," said Michael Stegman, counselor to the Secretary for Housing Finance Policy Friday. "This tool helps protect the interests of the American taxpayer, with private capital taking the predominant credit loss--aligning with the administration's goal of reducing the government's footprint in the mortgage market."

CUs Test the Waters Of State Small Business Credit Initiative

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MADISON, Wis. (7/29/13)--A few credit unions have carefully tested the waters of a federal program that helps financial institutions extend loans to small businesses that are creditworthy but do not meet standard lending criteria.
 
On Sept. 27, 2010, President Barack Obama signed into law the Small Business Jobs Act of 2010. The act created the State Small Business Credit Initiative (SSBCI), which was funded with $1.5 billion to strengthen state programs that support lending to small businesses and small manufacturers.
 
The initiative will allow states to build on successful models for state small business programs, including the collateral enhancement program, capital access program loan guarantee program. 
 
Representatives from credit unions that participate in the SSBCI programs note that they aren't likely to attract a windfall of new member business loans, but they can solidify relationships that might otherwise be lost.
 
"We see these kind of programs as a benefit of membership," Robert Myles, senior vice president of lending and retail services at Telhio CU, Columbus, Ohio, told News Now. Telhio has made three loans totaling roughly $1.1 billion through the SSBCI's collateral enhancement program.
 
Prior to 2012 credit unions were not previously eligible to participate in the program because they could not accept public funds. The Ohio Credit Union League secured an agreement with the Ohio Department of Development to allow credit unions to participate in the state's SSBCI (News Now June 19, 2012.
 
Eligible federally insured credit unions can participate without taking deposits of public funds. A credit union still must guarantee 30% to 50% of the loan as a collateral shortfall, enter into a collateral enhancement agreement for credit unions, and meet reporting and other requirements.

"Basically what the state does is set aside a deposit for that amount as insurance, so if we had a default it would pay after liquidation up to that amount," Myles told News Now.
 
In Wyoming, Mich., My Personal CU, with $110 million in assets, has entered into one loan deal through the Michigan Economic Development Corp. collateral support program. The credit union provided a loan to a manufacturing company that was hit hard by the economic downturn.
 
"We worked with them and were coming short on collateral because back then the appraisals were pretty anemic, but since then they've been from the program," said William Seniura, My Personal CU business lending specialist. "We still have loans with them.
 
"These are not catch-all programs, but they work when it's appropriate," Seniura added. "They don't turn a bad deal into a good deal. They allow us to make a deal that everybody thinks is a good deal or will shortly be a good deal, but is missing one or two components of our credit analysis that is making it hard to get approved. It enhances the loan."
 
Credit unions maintain they can do even more for small businesses if the cap on their member business loans (MBLs) were lifted. In Congress, separate House (H.R. 688) and Senate (S. 968) MBL bills have been introduced to increase credit unions' MBL cap to 27.5% of total assets from 12.25%. The Credit Union National Association has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

Fraudulent Transactions Reported By CUs In Several States

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MADISON, Wis. (7/29/13)--Credit unions and banks in four states--California, Missouri, Michigan and Montana--have reported fraudulent transactions involving consumers' accounts or attempts to capture personal financial information.
 
Santa Rosa, Calif.-based Redwood CU is reissuing 18,400 debit cards for members whose information may have been stolen in a cyber attack that targeted the Raley's supermarket chain's Bel Air and Nob Hill stores.
 
Redwood is one of several area financial institutions whose members/customers' information was compromised (The Press Democrat July 26). As of Thursday, Redwood had confirmed 200 fraud-related cases from the Raley's stores.  Raley's operates 115 stores in California and 13 in Northern Nevada.
 
One member reported a $500 fraudulent transaction by someone at an ATM in Las Vegas. He said the credit union refunded the amount stolen and issued him a new debit card on the spot.
 
Olivette, Mo., police say that a credit union's surveillance camera has caught photos of a woman believed to be the person who stole debit cards during smash-and-grab burglaries and used them at least four times at drive-up tellers at two locations of Bridgeton, Mo.-based Vantage CU (KSDK July 25). The woman, wearing the same clothes and driving the same car each time, struck twice on July 15, once on July 16, and again on July 17. The debit cards were stolen from cars in other cities, said police.
 
The woman was almost caught last week, when she tried to use a flagged account and the teller called 911. She got away before police arrived. It was not clear whether she is conducting the burglaries or if she has accomplices.

Two credit unions in Marquette, Mich., reported that signature-based card transactions have been blocked due to fraud, said UpperMichiganSource.com (July 26). The Marquette Community FCU and the U.P. Catholic FCU reported Friday afternoon that members' transactions were blocked in response to recent fraud detected in the Detroit area.  Pin-based transactions still work, said Marquette Community FCU.

In Missoula, Mont., Ravalli County residents received text messages that said their debit card account at a local bank had been locked and they would need to provide their account number to unlock it (KECI.com July 24).
 
Credit unions and banks warned consumers they do not contact recipients asking for account numbers, since they already have the numbers. They also urged consumers to delete and not respond to texts, e-mails, or phone calls seeking that information.

Patronage, Loyalty, Dividends Topic of Filene Report

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MADISON, Wis. (7/29/13)--At the base of a member's credit union relationship lies the promise of surplus--whatever a credit union earns in excess of its expenses is to be used on behalf of or returned to members, says a new Filene Research Institute report.

Beyond deposit-based dividends, members extend implicit flexibility to boards and managers about how that shared surplus should be used, said the report, "Patronage, Loyalty, and Credit Unions' Shared Surplus," by Daniel Cote, a professor at HEC Montreal.

Most members don't think of the surplus as theirs, because most credit unions don't talk about it that way. However, credit union leaders, as stewards, should think about that surplus and how it should be used to grow, to deliver value to, and to strengthen the cooperative, said Filene.

The report was produced in partnership with Credit Union Central of Canada, and challenges readers to consider how practices like patronage dividends, incentive programs, and strategic use of the surplus can engender loyalty and strengthen the credit union.

The first part examines the academic research behind loyalty, including Cote's own thinking about how a "new cooperative paradigm" can invigorate credit unions that cultivate loyalty.

The second part analyzes how three Canadian and three U.S. credit unions use their surpluses--in very different ways--to return value to members.

The report says the implications for credit unions are:
  • Shared surplus is a productive way to think about member value, economic or otherwise. The simplest way to return shared surplus is in extraordinary dividends, but just as valid are the approaches where the surplus is deliberately reinvested in a layered loyalty program that promotes patronage or even in a service delivery model that reinforces the brand.
  • Credit unions should pay more than lip service to loyalty. In a competitive environment, credit unions have a strategic advantage of being able to use surplus profits in a way that generates loyalty. Loyalty programs from both the literature and the report's case studies serve the needs of members and of the credit union as an institution. Members benefit from an improved value proposition, while the credit unions improve their competitive position and create incentives that are good enough to change the behavior of their members without eroding their profit margins.
  • Rewards-based loyalty programs are not costly to operate. The main component of the budget to set up and maintain such a program is tied to the cost of rewards themselves. More salient are the design behind the program and how a patronage- or loyalty-based program will encourage deeper interaction with the credit union. Some of the case studies describe large, sophisticated credit unions, but others show that being small does not prevent running effective loyalty or rewards programs.
To access the report, use the link.

Equifax: Delinquency Rates Continue To Decrease

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ATLANTA (7/29/13)--A turnaround in home pricing trends is a factor on the improvement of consumer payment behavior and delinquencies in all major areas--except student loans--for the first half of 2013, reports Equifax in its latest National Consumer Credit Trends Report, released Friday.
 
The trend mirrors the trend in credit unions. Overall loan delinquencies reported by credit unions in May were 1.14% of loans, compared with 1.17% in April, 1.2% in March, 1.21% in February and 1.18% in January, according to the Credit Union National Association's Credit Union Monthly Estimates for May 2013, the latest information available.
 
The Equifax data reflect that the biggest improvement was in the home finance arena, with year-over-year serious delinquency rates (90-days or more past due or in foreclosure) declining sharply as a percentage of total balances outstanding:
  • First mortgage delinquencies decreased more than 27%--to 4.14% from 5.70% ;
  • Home equity revolving decreased nearly 24%--to 1.75% from 2.30%; and
  • Home equity installment decreased more than 20%--to 3.31% from 4.16%.
Year-over-year changes in the 60-day-plus delinquency rates for other loans also decreased for bankcards, which dropped more than 16%--to 1.82% from 2.17%, and for auto loans, which decreased more than 11%--to 1.09% from 1.24%.
 
"The turnaround in home price trends over the past year is having a substantial impact on mortgage delinquency rates," said Equifax Chief Economist Amy Crews Cutts. "As more and more homeowners find themselves back in positive equity, the incentive to default is strongly tempered."
 
She noted that performance in other sectors is improving with the gradual economic recovery, but "we are seeing a strikingly different trend with student loan debt, which is both the fastest growing consumer debt segment and the only segment in which we're seeing rising severe delinquency rates and accelerating write-off rates."
 
Other results for home equity revolving, bankcards, auto and student loans are listed below.
 
Home equity revolving:
  • The total balance of new credit opened from January to April increased more than 17%  to $24.1 billion, compared to the $24.1 billion for the same time period in 2012;
  • The total number of new loans also increased more than 11%, to 297,600 from 266,600; and
  • Both new loans and new credit year-to-date in April are four-year highs.
Bankcard:
  • At $62.3 billion, the total limit of new credit issued between January and April is a five-year high for that period and an increase of 74% over the recession low of $35.8 billion for the same time during 2010;
  • The total number of new loans year-to-date in 2013 is 13.2 million, a five-year high for that period and an increase of more than 6% from the 12.4 million for the same period one year earlier; and
  • Compared to $58 billion the first four months of the year in 2012, the year-to-date total limits of new credit increased more than 7%, to $62.3 billion.
Auto:
  • The total balance of new credit issued January-April is $152.7 billion, an eight-year high for that period and an increase of more than 13% from January-April 2012;
  • Year-over-year, total outstanding balances rose more than 9% to $816.4 billion in June 2013 from $745.1 billion in June 2012;
  • The total number of new loans year-to-date in April 2013 increased more than 10% from the a year earlier--to 7.7 million from seven million; and
  • By source, bank- funded auto loans rose more than 19% year-over-year for the first four months of 2013 to $76.9 billion from $64.3 billion, while auto finance company-funded loans were up more than 8%, to $75.8 billion from $70 billion.
Student Loan:
  • The total balance of loans outstanding increased year-over-year more than 11% to $880.3 billion from $791.2 billion in June 2012;
  • New credit year-to-date in April totaled $19.3 billion, an increase of nearly 14% from the period a year earlier; and
  • Conversely, the total number of new loans originated during this same time decreased 1.9%, from 3.4 million to 3.3 million, a five-year low for the first 4 months of the year.

CUbroadcast Marks 200th Online Video Talk Show

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SAN DIEGO (7/29/13)--Credit union online video talk show CUbroadcast  is marking its 200th episode by interviewing representatives from the Filene Research Institute and Currency Marketing about their CU Water Cooler Symposium show set for Oct. 17-18.

Host Mike Lawson interviewed Filene's Matt Davis and Currency Marketing's Tim McAlpine about Water Cooler, which they describe as an event where passionate credit union folks can listen and exchange ideas at a high level. To view the interview, use the link.

The Web-based credit union talk show was launched in November 2010. Twice a week it posts interviews discussing credit union issues and trends. Among those who have been guests on the show are National Credit Union Administration Chairman Debbie Matz and Credit Union National Association President/CEO Bill Cheney.

"I have met so many fantastic folks in this industry who are incredibly humble and passionate about their cause," Lawson said. "It's a very refreshing escape from other industries. Credit union people are so eager to tell their story--and that's what makes everybody so compelling to talk to."

During the second half of the year,  CUbroadcast has plans to make the show more attractive to watch and will add features to provide more information, he said.

Archbishop's 'War' On Payday Loans Shines Spotlight On CUs

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LONDON (7/2913)--Calling them a "financial cancer," the Archbishop of Canterbury has declared war on payday lenders in the United Kingdom by creating a credit union for clergy and members of the Church of England and Church of Scotland. The result: a media frenzy of bad publicity for payday lenders and good publicity for credit unions.
 
The coverage didn't quite rival the media hullabaloo over the birth earlier in the week of Prince George, but on Friday News Now counted 35 articles and broadcasts about the battle of  (Archbishop Justin) Welby vs. Wonga, Britain's major payday lender.
 
Most mentioned the credit union he formed earlier this month.  Articles ran in the BBC, The Telegraph, Yahoo! News, Financial Times, The Independent, The Scottish Sun, Oman Tribune, and Fiji Times, among others. The BBC's item was headlined, "What are credit unions and how can you use them" (July 26).
 
The church's move has raised awareness about the benefits of credit unions, said the Association of British Credit Union Leagues (ABCUL) Friday, in welcoming the archbishop's support.
 
"The wide community reach of the organization and the skills within its congregations mean it is one of many groups that can help raise awareness of the benefits of credit unions and help them to grow," said ABCUL CEO Mark Lyonette (ccrmagazine.com July 26).
 
He added ABCUL will be "talking to the Church of England about how this can be achieved. People in their congregations and communities of all incomes will benefit from the great value services credit unions provide. And the more people who use credit unions, the more successful they will be."
 
Meanwhile, the CEO of payday lender Wonga said he welcomed the competition. He made the comment after Welby told him that the Church of England would help credit unions force the firm out of business (BBC July26).

Altura CU Reports Ninth Quarter Gain On Net Income

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RIVERSIDE, Calif. (7/29/13)--Altura CU in Riverside, Calif., Thursday reported net income of $3.47 million on total assets of $704.6 million for the second quarter. It is Altura's ninth consecutive quarter of net gain.
 
"We continue to see slow and steady improvement in the local economy and that has a positive impact on Altura's bottom line," said Altura CEO Mark Hawkins. "We had a great second quarter this year, the second best total in our history. Things are on a slow, yet improving, trajectory."
 
Net income for the first half of 2013 was $8.45 million, compared with $11.07 million for the same period in 2012. Altura also reported a net worth ratio of 10.82% for the second quarter, up from 8.69% for the same period last year. That figure is also up from the first quarter of 2013, when Altura reported a net worth ratio of 10.13%.
  
Altura is part of the Inland Empire, an area about 60 miles east of Los Angeles. The Inland Empire economy continues to improve at a slow, but steady pace. Unemployment is still the biggest drag on the local economy, holding at 10.2%, Altura said. Although still above national and state unemployment rates, the current figure is an improvement over the 15.4% reported at the height of the recession in July 2010.
 
The Great Recession hit the Inland Empire hard and impacted Altura's financials.  Since then, the credit union has been steadily strengthening.
 
"The market is healing. In fact from a credit quality perspective, you could even say it has healed," Hawkins said. "The number of delinquent loans is down substantially, enabling us to reduce the amount set aside for loan loss provisions from $25.2 million in June 2012 to $15.7 million this year.
 
"However, people in our community remain understandably cautious," he added. "Their wariness is holding back loan growth, a major contributor to Altura's income. As the market continues to stabilize, we hope to see more job growth and marketplace productivity."
 
Revenue growth is up compared to projections, particularly for non-interest income and investment income, Hawkins said.
 
"Members' discretionary spending has been steady, and they are using their debit and credit cards more," he added. "As a result we have seen an uptick in interchange income. With economic improvements, people are also investing more, boosting that income stream as well."