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Inside Washington (07/31/2008)

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* WASHINGTON (8/1/08)--The Federal Housing Finance Agency (FHFA), the new agency that will regulate Fannie Mae, Freddie Mac and the Federal Home Loan Banks, has been established as a result of a housing bill President Bush signed into law this week. Aside from watching over the government-sponsored enterprises, the agency has to create standards to govern internal audit systems, internal controls, interest-rate-risk management, market risk management and liquidity adequacy (American Banker July 31). The Office of Federal Housing Enterprise Oversight (OFHEO), which is currently Fannie and Freddie’s regulator, will continue for one year with limited capacity. OFHEO and the Finance Board will transfer their employees to the FHFA. James Lockhart, former OFHEO director, will head the FHFA ... * WASHINGTON (8/1/08)--The Securities and Exchange Commission extended the restrictions on short sales for 17 Wall Street firms late Tuesday (American Banker July 31). The restrictions will continue through Aug. 12, giving staff 10 days to review data on the restrictions’ effect. The agency said the order will not be extended after Aug. 12 ... * WASHINGTON (8/1/08)--The Federal Deposit Insurance Corp. (FDIC) has issued a financial institution letter with final guidance on the Supervisory Review Process of Capital Adequacy (Pillar 2) under the Basel II Advanced Capital Framework. The guidance takes effect Sept. 2 ...

CUNA-sought changes included in student lending bill

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WASHINGTON (8/1/08)—Two changes sought by the Credit Union National Association (CUNA) to a federal higher education bill were included in a Conference Report prepared for a final vote in Congress. The changes involve provisions in the original bill that could adversely affect university-sponsored credit unions. The bill, the Higher Education Opportunity Act, reauthorizes the Higher Education Act of 1965 for the first time since 1998, making significant amendments to the law that governs federal higher education programs, including financial assistance for students. The House and Senate have previously approved slightly different versions of the bill and a conference committee prepared a compromise “conference report” version of the legislation. The House approved the compromise Thursday and the Senate was expected to do the same as soon as last evening. The bill requires lenders and colleges to adopt strict codes of conduct for their student lending programs. A concern was expressed that the bill, as originally passed by the House, would prohibit a lender from using the name of the educational institution in marketing the lender’s private educational loans. “If enacted, this may have presented university-sponsored credit unions with a dilemma,” explained Ryan Donovan, CUNA vice president of legislative affairs, Thursday. “We sought and received language that should provide credit unions that are named for a university sufficient latitude to market their student loans-- provided that they do not imply that the loan is made by the university and not the financial institution,” he said. Also, CUNA won for credit unions an exemption to a 50% rule that the act granted national and state-chartered banks. Specifically, the bill imposes a 50% limitation stating that an eligible lender cannot have as its primary credit function the making or holding of federal student loans. Under the House-approved version of the bill, Federal Family Education Loan Program (FFELP) loans may not represent more than 50% of a lender’s consumer credit loan portfolio, including home mortgages. The bill provided an exemption for national banks with assets under $1 billion and CUNA secured that exemption for credit unions. The House approved the compromise bill Thursday by a 380 to 49 vote. The Senate was expected to consider the conference report on Thursday evening.

The Mica Minute CUs Are Safe and Sound

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WASHINGTON (8/31/08)--The safety, soundness and strength of credit unions--backed by federal insurance--is outlined in Dan Mica’s latest “Mica Minute” video, posted on the Internet, as well as on the Credit Union National Association (CUNA) website. In the video, Mica explains how recent news reports on the failure of banks urged consumers to be sure to save their money in “banks insured by the FDIC.” Mica points out that those reports left out the fact that virtually all credit unions are also backed by federal insurance. Click on the image above to view the YouTube video. Those unable to access YouTube can watch the video using the link below.

Bankers FOM resolution plan due Aug. 20

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WASHINGTON (8/1/08)— The American Bankers Association and other banker plaintiffs have until Aug. 20 to file their brief addressing recommendations to the court for a resolution to the recently decided field-of-membership lawsuit in Pennsylvania. The National Credit Union Administration (NCUA) and the credit union defendants have 15 days after the bankers respond to file their reply brief. The U.S. District Court, Middle District of Pennsylvania ruled against the NCUA in July in a bankers’ lawsuit against the agency’s decision granting a six-county area community credit union field-of-membership expansion in Pennsylvania. That approval involved Harrisburg, Pa.-based Members 1st FCU's and was later used as basis to authorize two other charter requests, one from New Cumberland FCU and the other from AmeriChoice FCU. The case did not challenge NCUA's community charter regulations. It was a fact-specific challenge and involved only the credit unions named. The court concluded, in the case known as American Bankers Association v. National Credit Union Administration, that “under all the circumstances, the decision of the NCUA is arbitrary and capricious and must be set aside." The court determined that "after a careful review of the record, that the NCUA's analysis is insufficient in this case..." The court directed the parties to file briefs regarding the proper resolution of the case, "Inasmuch as the briefs have not addressed the applicability and scope of available remedies," the court said. After the court’s decision, the Credit Union National Association (CUNA) pledged to work with the credit unions and the Pennsylvania CU Association (PCUA) to help the credit unions deal with the judge's order. Rick Wargo, PCUA executive vice president and general counsel, concurred: "We note Judge Kane did not prescribe a remedy. We will work with the three credit unions and NCUA on the remedy phase of the case in an effort to mitigate the decision."

CDFI director attends Tenn. HOPE CU opening

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WASHINGTON (8/1/08)—A U.S. Treasury Department official, Donna Gambrell, will be on hand in Memphis today to attend an event celebrating the opening of the first Tennessee branch of Hope Community CU (HOPE). Gambrell, who is director of Treasury’s Community Development Financial Institutions (CDFI) Fund, will deliver remarks and participate in a ribbon-cutting ceremony. Hope Community CU was founded in 1995, in part, to provide an alternative to the high-cost, payday lenders. It currently operates in Mississippi, Alabama, and Louisiana. It offers such services and products as basic checking and savings accounts, online banking, bill pay services and member small business loans. The credit union describes its mission as one to “strengthen communities, build assets and change lives in economically distressed areas…” Its website reports that since inception, HOPE and its sponsor, Enterprise Corporation of the Delta, have generated over $300 million in financing and brought economic opportunities to more than 30,000 people in economically distressed areas. In 2005, HOPE was recognized as the fastest growing credit union in the nation for building deposit. A 2007 survey ranked HOPE for the fifth largest increase in membership growth in the country during 2005 and 2006. The Treasury’s CDFI program administers community development grants. It uses small amounts of federal dollars to leverage significant amounts of private and non-federal dollars to support the CDFI industry. According to Treasury, since its creation, the CDFI Fund has awarded $864 million to community development organizations and financial institutions; it has awarded allocations of New Markets Tax Credits which will attract private-sector investments totaling $16 billion, including $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone. Use the resource link below for more information on applying for CDFI grants.

Inside Washington (07/30/2008)

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* WASHINGTON (7/31/08)--The adequacy of the Federal Deposit Insurance Corp.’s (FDIC) insurance fund is being analyzed in the aftermath of the IndyMac bank failure. The failure could eliminate up to 16% of the FDIC’s $53 billion in reserves (American Banker July 30). The failures Friday of First National Bank of Nevada, Reno, and First Heritage Bank, Newport Beach, Calif., could cost the agency 24% of its assets. A typical failure costs 10% to 20%. The FDIC, which has never needed a backstop, has $30 billion in credit with the Treasury Department. Observers said another large failure could deplete the FDIC’s fund, and they expect the agency to raise its premiums to keep reserves healthy. The ratio of reserves to insured deposits was 1.19% at the end of the first quarter, and the agency predicted the ratio would drop to 1.15% after the IndyMac failure. Analysts say the ratio could drop to 1.01%, and banks could pay premiums of 10 to 15 basis points per $100 of domestic deposits ... * WASHINGTON (7/31/08)--Democratic presidential candidate Barack Obama (D-Ill.) spent Tuesday meeting with Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson on the economy. The day before, he met with a panel of economic experts, including the chairman of Citigroup Inc.’s executive committee, Robert E. Rubin (American Banker July 30). Obama asked Paulson how the department will use its new authority over the government-sponsored enterprises and if it’s prepared to tackle banking industry challenges. Obama is consulting with experts to address problems in the financial sector, and has a good sense of the issues, Rubin said. Obama’s meeting occurred the same day the White House announced that the national deficit would hit $482 billion in the next fiscal year. Prior to his meeting with regulators, the senator spent 10 days in the Middle East and Europe ... * WASHINGTON (7/31/08)--The Securities and Exchange Commission (SEC) did not issue an order extending restrictions on sales in 19 stocks as expected Tuesday night. SEC Chairman Christopher Cox said Tuesday that the agency was examining economic data on the restrictions’ effect, which suggests the restrictions have prevented problems in the market. He said the agency will consider the rules as soon as it has time ... * WASHINGTON (7/31/08)--The U.S. Small Business Administration (SBA) revised its size standards for small businesses in the Heating Oil and Liquefied Petroleum Gas Dealers industries and restored small business eligibility to those firms that may have exceeded their existing size standards due to higher receipts generated by rising oil prices. The SBA also finalized the December 2005 interim final rule that amended monetary-based small business size standards for inflation ... * WASHINGTON (7/31/08)--The Office of the Comptroller of the Currency announced Wednesday that Beth Castro will be its director of community development. She will be responsible for the community affairs department’s research and publications and will manage the agency’s district community affairs officers. She will report to Barry Wides, deputy comptroller for community affairs. Castro previously worked as first vice president at Washington Mutual, where she managed Community Reinvestment Act programs and initiatives, community development outreach and homeownership preservation efforts ...

CUNA urges balance in fair credit card bill

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WASHINGTON (7/31/08)—The Credit Union National Association (CUNA) backs much of H.R. 5244, the Credit Cardholders’ Bill of Rights Act expected to be voted by the House Financial Serivices Committee today, but urges balance in rules to end discriminatory, predatory, deceptive and abusive lending practices to avoid unintended consequences. Prior to the anticipated House vote, CUNA sent a letter to the bill’s chief sponsor, Rep. Carolyn Maloney (D-N.Y.), recognizing that there are legitimate concerns about abusive credit card practices. CUNA applauded efforts to end credit card and lending abuses. However, CUNA reminded that innovations in the financial services sector, such as the credit card, make credit more available, less expensive, and more convenient for consumers. Credit unions and other financial institutions must be able to price their attendant risks appropriately, the CUNA letter noted. In addition to the Maloney bill, in the Senate the chairman of the banking committee, Sen. Christopher Dodd (D-Conn), has introduced similar legislation (S. 3252). Also in the mix, the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration (NCUA) issued a joint proposal that addresses several of the concerns raised in the legislation. The joint proposed rule is open for public comment until Aug. 4 and CUNA will submit its comments in the near future. It is expected that the agencies will finalize their plan by the end of the year. CUNA recommended to Maloney that “it may be more prudent to let the regulatory process run its course prior to legislating a remedy.” In fact, that may well be what Capitol Hill intends. The July 30 issue of American Banker noted that lawmakers are unlikely to pass card reform this year, but may be meaning the House vote to send regulators a prod to continue work on their proposed crackdown on abusive lending practices. In a related story, on July 23 fourteen House members—all constituents of the House Financial Services Committee—wrote to their committee chairman to request that one of the panel’s subcommittee’s conduct a hearing on the agencies’ joint Unfair or Deceptive Acts or Practices (UDAP) proposal. The letter to Chairman Barney Frank (D-Mass.) noted the Fed has received more than 20,000 comment letters—identified as 30,000 letters by some sources—on the plan. Use the resource link below for CUNA’s provision-by-provision position on H.R. 5244.

Housing bill signed quick implementation now expected

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WASHINGTON (7/31/08)—As President George W. Bush signed the Housing and Economic Recovery Act into law, Sen. Christopher Dodd (D-Conn.) professed confidence that the refinancing program meant to ease the country’s mounting mortgage foreclosure problem would be operational by Oct. 1 as intended by the new law. Dodd called the heads of the Federal Reserve Board, Treasury Department, Federal Deposit Insurance Corp. and U.S. Department of Housing and Urban Development (HUD) together Tuesday after A HUD spokesman had doubted the agencies’ ability to meet the October implementation deadline. (American Banker July 30) Dodd said afterwards that HUD Secretary Steven Preston expressed confidence that the rules would be ready on time. Preston said his agency would start July 30 to begin working out details. The article also reported that Preston will ask President Bush to expedite a request to let HUD hire 300 additional staff immediately to facilitate implementing the refinancing program.

Congressional commuters receive Little Guy coins

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Click to view larger imageNearly 4,000 chocolate coins were distribted to Capitol Hill commuters Wednesday morning. The coins urged recipients to visit www.lookoutforthelittleguy.org. (Photo provided by CUNA)
WASHINGTON (7/31/08)--Capitol Hill commuters--especially congressional staff--were greeted Wednesday morning with chocolate coins celebrating the “Little Guy” and his website in the final days before the summer recess. The coins, developed by the Credit Union National Association (CUNA) as part of its “Change the Conversation” program, were emblazoned on one side with the words “Credit Unions are big on people, not profit.” On the other side, the coin stated: “For another treat, visit www.lookoutforthelittleguy.org.” “Our mission in the ‘Change the Conversation’ program is to talk about credit unions in clear, undistorted terms, rather than those used by the banking industry and others,” said CUNA’s Communication Vice President Pat Keefe.
Click to view larger image CUNA staffers and other credit union supporters distributed the coins to commuters on the House and Senate sides of Capitol Hill Wednesday morning. (Photo provided by CUNA)
“For example, we point out that credit unions represent only 6% of the financial services marketplace--compared to the 94% held by the banking industry,” he said. Nearly 4,000 chocolate coins were distributed to Capitol Hill commuters on both the House and Senate sides. Use the resource links below to learn more.

Compliance Know your flood insurance duties

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WASHINGTON (7/30/08)—Farmers, business owners and homeowners in many areas of the country are struggling to recover from massive flooding this year. 2008 has witnessed recent floods in New Mexico and Texas caused by the torrential rains attached to Dolly; floods in Iowa, Indiana, Wisconsin; floods wrecking havoc throughout the Midwest and more. Aptly, the Credit Union National Association’s (CUNA’s) Compliance Challenge this month quizzes credit unions with a question on federal flood insurance requirements. The Challenge reminds credit unions that federal regulators may impose civil money penalties for noncompliance with mandatory flood insurance purchase requirements. Federal law requires such penalties when a lender has exhibited a “pattern or practice” of failing at such things as:
* Requiring the purchase of flood insurance for loans secured by improved real estate located in a special flood hazard area (SFHA); * Placing flood insurance premiums, on applicable loans, in escrow if the credit union requires the escrow of taxes, insurance premiums, fees, or other charges; * Providing the proper notices pertaining to covered loans (e.g., flood hazard determination notice, notification of change in loan servicer); and * Purchasing insurance on the borrower’s behalf when the borrower fails to maintain adequate flood insurance coverage. That practice, known as “force placing” insurance, should occur after notifying a borrower of the deficiency, and giving him or her 45 days to purchase the appropriate coverage.
Credit unions should note, advises the Challenge, that the per-violation and aggregate amounts of civil penalties are adjusted for inflation on a periodic basis. Now, what about civil liability? Use the resource link below to read about that issue, and many more compliance gems, by linking to CUNA’s compliance web page.

iNewsWatchi Special Edition CUs are Safe and Insured

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WASHINGTON (7/31/08)—The Credit Union National Association (CUNA) and the leagues are working on behalf of credit unions to reassure their members about the safety of their deposits in the credit unions system and about the soundness of that system despite today’s upheavals. CUNA this week distributed to each member credit union a special edition of Credit Union NewsWatch that encapsulates the many CUNA resources newly designed to help credit unions and their staffs address the public’s questions and concerns about the safety of their money in trying economic times. The issue features a two-page “Primer on Share Insurance Coverage For Individual Credit Union Members,” as well as a two-page spread on operational questions affecting share insurance coverage, geared toward credit union compliance staff. Also included in the special edition are:
* CUNA, Leagues Help CUs Spread Good News of Safety, Soundness * NCUSIF Strong at Mid-Year, Says NCUA * CUNA, Leagues Get Word Out About CU Soundness
CUNA members may use the resource link below to access the special CUNA resource.

Four Hill UIGEA proponents question implementation

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WASHINGTON (7/30/08)—Four House members who were proponents of the Unlawful Internet Gambling Enforcement Act as it made its way into public law have sent a joint letter to the Treasury Secretary and Federal Reserve Board chairman questioning implementation. The U.S. Treasury Department and Fed are charged with implementing the provisions of UIGEA. Recently, the House Financial Services Committee narrowly voted down the Payment System Protection Act (H.R. 5767), which would have forced the agencies to set aside their current proposal to implement the Internet gambling prohibitions. Under the law, financial institutions must establish and implement policies and procedures to identify and block restricted transactions, or rely on those established by the payments system. Opponents of the proposed rules, including the Credit Union National Association (CUNA), argue that they lack clarity and sufficient definition of terms, and that they would represent an impossible compliance burden for credit unions and other financial institutions. The lawmakers’ letter raised some of the same concerns. “As proposed, those regulations do not provide clear guidance to the public, in particular those that engage in online skill games, or regulated industries regarding what constitutes unlawful internet gambling,’” said the letter signed by Reps. Judy Biggert ( R-Ill.), Christopher Shays (R-Conn. ), Jim Gerlach (R-Pa.), and Kevin McCarthy (R-Calif.). All signers are members of the House Financial Services Committee. The lawmakers reiterated that they voted for UIGEA and “support it now.” “However,” they wrote, “we are concerned about the legal and operational viability of a rule that leaves so much to interpretation and, accordingly, urge the Board and Treasury to take a more deliberative path to a workable rule…”

Broader incidental powers plan needed says CUNA

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WASHINGTON (7/30/08)—The National Credit Union Administration (NCUA) should implement its three proposals to expand the definition of incidental powers for federal credit unions, but it should also go further than its current plan, according to the Credit Union National Association (CUNA). CUNA, commenting on an NCUA proposed rule that would add illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities, said it supports the agency plan as far as it goes. However, CUNA wrote in a July 28 comment letter, the NCUA and Office of the Comptroller of the Currency (OCC) use the same three-part test to determine appropriate incidental powers, but the OCC has been more liberal in according incidental powers than has been the NCUA. The federal credit union regulator should therefore use its interpretative authority to determine incidental powers for credit unions in a manner more consistent with OCC's incidental powers determinations. CUNA also urged the NCUA to allow for federal credit unions any state-authorized incidental powers in their state of operation, as long as the activity has not been prohibited by the Federal Credit Union Act. Additional new incidental powers recommended by CUNA include allowing federal credit unions to:
* Accept pre-paid funeral home accounts under the trustee or custodial services category; and * Manage repossessed residential properties for other credit unions.
CUNA also continues to encourage the NCUA to authorize a foreign currency investment pilot program as CUNA recommended in an October 2007 comment letter. The NCUA routinely examines one-third of its body of regulations each year to determine if any improvements can be made. The incidental powers proposal was the result of this routine look. Use the resource link below for more information on the NCUA incidental powers proposal.

Hood finds notable initiatives in Chinese system

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ALEXANDRIA, Va. (7/30/08)—National Credit Union Administration (NCUA) Vice Chairman Rodney Hood said a remarkable fact he uncovered during a recent official trip to Beijing was that, through the outreach efforts of the Chinese banking regulator, nearly every person in China has an account with a financial institution. Hood met with Jiang Dingzhi, vice chairman of the International Department for the Chinese Banking Regulatory Commission (CBRC). The purpose of the meeting was to gain a broader understanding of the Chinese financial system and to share best practices of financial regulation. Hood also inquired about a new initiative that he said is of special interest to him; a microcredit pilot program being considered in one Chinese province. Hood said that to facilitate the needs of small businesses, the Chinese government is looking to debut microcredit companies in the Zhejiang province that will provide loans to small and medium-sized enterprises. Also during the meeting, Hood outlined the role of NCUA and the importance of the credit union system in helping underserved American’s attain financial security and ultimately achieve the “American Dream” of homeownership. Hood also noted the importance of financial literacy and how credit unions are making that a reality through required education programs that teach members how to manage money. Hood extended an invitation for Dingzhi to visit the NCUA the next time he is in the United States.

Hyland stresses ALM third party due diligence

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WASHINGTON (7/30/08)—Credit unions in today’s economy should pay special attention to asset-liability management and third-party due diligence, advised National Credit Union Administration (NCUA) Board Member Gigi Hyland in remarks this week to the Metropolitan Area Credit Union Association, a group of Washington, D.C.-area credit unions. Today about half of credit union assets are in real estate lending, often supported with more volatile shorter-term deposits. The combination underscores the importance of asset-liability management, said Hyland, calling this one of NCUA’s “hot examination issues.” A second hot issue is third-party due diligence, one Hyland recalled was a concern back when she was a private-sector attorney and saw too many credit union clients prepared to sign contracts that would have left them with excessive liability. She urged credit unions to read NCUA’s December 2007 letter to credit unions and the agency’s AIRES questionnaire on due diligence, and watch the webinar she hosted on this subject earlier this year which included and series of frequently asked questions on this subject, all available on the agency’s web site, www.ncua.gov. One the executive compensation recommendations of NCUA’s Outreach Task Force, which Hyland chaired, she said further action is awaiting a review by the agency’s new chairman, Michael Fryzel, and the full NCUA board “to evaluate how we go forward with that.” CUNA opposes the executive compensation disclosures called for by the task force, arguing they are unnecessary. With the housing bill now passed by Congress and on its way to the president, Hyland was asked if the agency is considering a letter to credit unions on its possible impact, specifically whether the legislation’s Federal Housing Administration loan workout provisions intended to stem foreclosures may force more second-mortgage lenders, such as credit unions, to walk away from home equity loans. “We need to see what the final bill looks like and what type of regulatory guidance we might issue in conjunction with the FFIEC [Federal Financial Institution Examination Council],” Hyland responded.

Inside Washington (07/29/2008)

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* WASHINGTON (7/30/08)--Critics are arguing that top executives at Fannie Mae and Freddie Mac should step down from their positions because the government had to step in and rescue the enterprises (American Banker July 29). Mistakes can be traced by to the companies’ CEOs, according to Bert Ely, an independent analyst in Alexandria, Va. Thomas Stanton, a fellow at the National Academy of Public Administration, said the CEOs needed to take longer-term perspectives in managing the enterprises, instead of concerning themselves with just the quarterly reports. Others say Fannie’s CEO, Daniel Mudd, and Freddie’s CEO, Richard Syron, could not control the circumstances that led to the enterprises’ downfall. At a hearing on the enterprises two weeks ago, Henry Paulson, Treasury secretary, said he is grateful for the service the enterprises’ management is providing ... * WASHINGTON (7/30/08)--Regulators pushed for the use of covered bonds by financial institutions during a press conference Monday. The bonds can increase mortgage financing, strengthen financial institutions by providing funding and improve underwriting standards, said Treasury Secretary Henry Paulson. Bank of America, Citigroup, Wells Fargo and JP Morgan Chase and Co. said they would issue covered bonds soon. Bank of America is the only one who has offered the bonds in the U.S., while Washington Mutual has offered them overseas. Covered bonds are used to fund assets that remain on a balance sheet when banks sell their loans to be packaged into securities. The bonds could prevent mistakes that triggered the housing crisis, regulators said ...

Fryzel sworn in as NCUA chairman

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Click to view larger image NCUA Board nominee Michael Fryzel before his June 3 Senate Banking Committee hearing on Capitol Hill. (Photo provided by CUNA)
CHICAGO (7/30/08)--Michael E. Fryzel became chairman of the National Credit Union Administration (NCUA) yesterday in Chicago, said the agency in a release. The Honorable Lee Preston, Judge of the Cook County Circuit Court and longtime friend of Fryzel, administered the oath of office at 12 p.m. CT. “I am grateful to the president for this opportunity to serve,” said Fryzel in a statement. “To be the NCUA chairman is a tremendous honor and I pledge to work to the best of my ability to fulfill the trust that has been placed in me.” Fryzel last month reiterated his priorities as NCUA chairman: "vigilant and thorough supervision, emphasis on safety and soundness, and dedication to protecting the consumer." "The credit union industry, now entering its second century, has proven itself valuable to America's consumers and as such has a right to expect fair, consistent, common-sense regulation," he said. "It is my commitment to conduct my chairmanship in that manner."

Overdraft opt-out clause identified as CUs biggest concern

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WASHINGTON (7/29/08)—About 155 credit union representatives tuned in for a Credit Union National Association (CUNA) audio conference Monday on proposed credit card and overdraft protection regulations. The National Credit Union Administration (NCUA), along with the Federal Reserve Board (Fed) and the Office of Thrift Supervision, has published a joint proposed rule that will prohibit a number of credit card practices and will impose restrictions on overdraft protection plans. The Fed has also published two separate but related proposals that amend Regulation Z, the Truth in Lending Act, and Regulation DD, the Truth in Savings Act (TISA). Audio conference participants were told that the NCUA has received about 75 comment letters on its proposal. A focus of concerns involves a provision requiring institutions to allow partial opt-outs for overdraft plans. The partial opt-out would allow consumers to choose to opt-out of ATM or debit card overdrafts while allowing overdraft coverage for checks. Other concerns involve provisions prohibiting overdraft fees if they results from a hold placed on a prior transaction, and a requirement that an opt-out right for an overdraft protection plan has to be provided for each periodic statement period in which an overdraft occurs. Representing the NCUA during the conference were: Matt Biliouris, NCUA program officer in the Office of Examination & Insurance; Tonya Green, NCUA staff attorney in the Office of General Counsel; and Ross Kendall, also a staff attorney in NCUA 's Office of General Counsel. A Fed attorney, Ky Tran-Trong, explained that the overdraft rules at least partially arises from a recognition that in some circumstances overdraft and credit card disclosures have been insufficient. Tran-Trong noted that the Fed will also eventually review rules on student loans, automobile loans, home equity lines of credit and that there has been significant consumer testing as part of this rulemaking process. The federal regulators anticipate finalizing their unfair and deceptive acts and practices (UDPA) by the end of this year. The Fed has said it received more than 30,000 comment letters on its UDAP proposal. Because credit unions are not covered by the Fed’s TISA proposal, the NCUA intends to issue its own TISA proposal for comment early next year. The Federal Trade Commission regulates UDAP for state credit unions. That agency has not issued a proposal, but it is expected that state credit unions will be required to conform to the joint rules on credit cards. Also participating on the CUNA audio conference, Alan Cameron, president of the Idaho CU League, address issues raise in the Consumer Advisory Council, of which he is a member. CUNA Deputy General Counsel Mary Dunn moderated the session.

Informational conference calls on CDFI certification

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WASHINGTON (7/29/08)--The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced an upcoming series of conference calls regarding CDFI certification. The calls are intended to serves as a forum for potential certification applicants to ask questions of CDFI Fund staff about becoming a certified CDFI. Credit unions and other organizations may be CDFI certified to provide financing and related services to communities and populations that lack access to credit, capital and financial services. To become certified, an organization must: be a legal entity, have an eligible primary mission, be a financing entity, serve an eligible target market, be accountable to the target market, provide corresponding development services, and not be controlled by a government entity. Among other benefits, CDFI certification allows applicants to apply for financial assistance through the CDFI Program. The schedule of conference calls is outlined below:
* Aug. 21, 2-3 p.m. EDT; * Sept. 18, 2-3 p.m. EDT ; * Oct. 16, 2-3 p.m. EDT; and * Nov. 13, 2- 3 p.m. EST.
To access any of the conference calls, participants need to call (202) 927-2255 and enter in the pin number 178182. No prior registration is necessary. The phone number and pin number are the same for all of the conference calls. For more information about CDFI certification eligibility and the application process, use the resource link below.

HUD foreclosure regs may lag lawmaker expectations

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WASHINGTON (7/29/08)—The foreclosure prevention program passed this weekend by the Senate and last week by the House could take a year to become operational even though lawmakers expect it to be up and running in October. On Saturday, the Senate voted soundly in favor of the much-debated housing package designed to support a troubled housing market. It passed 72 to 13 in that chamber, and 272-152 last Wednesday in the House. President Bush is expected to sign the bill soon. However, a spokesperson for the Department of Housing and Urban Development (HUD) indicated that there is little chance that implementing regulations for the program that would let the Federal Housing Administration (FHA) insure foundering mortgage loans would be ready by October. (American Banker July 28) The legislation requires the regulations to be written jointly by HUD, the U.S. Treasury Department, the Federal Reserve Board, and the Federal Deposit Insurance Corp. Those rules would allow HUD’s FHA program to insure mortgages that exceed the value of a home after lenders and servicers have written down the principal to 87% of the current market value. The program is expected to help 400,000 borrowers avoid foreclosure. However, according to the American Banker article, the scope and structure necessary for implementing regulations are so broad that they will demand significant clearance procedures—which take time. Lawmakers immediately and vehemently objected to the idea of a delay. House Financial Services Committee Chairman Barney Frank (D-Mass.) said that the scope of the current social and economic crisis presented by burgeoning mortgage foreclosures makes following the normal bureaucratic procedures an “incompetence.” Also, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) Saturday called on the heads of implementing agencies to explain why the foreclosure mitigation plans might not be operational when the effective date of the law is in October. (American Banker July 28) At Saturday press conference announcing the Senate’s affirmative vote on the legislative package, Dodd said he wanted the regulatory oversight board tasked with hammering out the rules to be in his office Tuesday to talk about getting the bill working.

NCUA liquidates 12.8 million asset CU

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ALEXANDRIA, Va. (7/29/08)—New London Security FCU, New London, Conn., was liquidated Monday by the National Credit Union Administration (NCUA). The agency said in its announcement that it closed the $12.7 million-asset credit union because it was determined to be insolvent with no prospects for restoring viable operations. According to 5300 Call Report data, the credit union had only about $68,000 in cash to cover $10 million in share deposits. The credit union didn’t have many loans, but had its funds tied up in securities. If there was difficulty in selling them, the credit union would have trouble covering member withdrawals. The NCUA’s Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the credit union. Through the National Credit Union Share Insurance Fund, credit union members’ deposits are insured to at least $100,000 per account. The credit union was chartered in 1936 and at the time of liquidation served 365 New London-area residents.

Inside Washington (07/28/2008)

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* WASHINGTON (7/29/08)--The projected budget deficit for the fiscal year beginning Oct. 1 will be $490 billion--about $83 billion more than President Bush projected in February (Bloomberg July 28). The shortfall may be reflected in the cost of distributing economic stimulus payments, the overall economic slowdown and expenses from wars in Afghanistan and Iraq. Dana Perino, White House press secretary, declined to comment on the projections at a press briefing Monday. A July 25 Bloomberg survey indicated that the deficit will be at $447 billion next year and $407 billion this year ... * WASHINGTON (7/29/08)--The Securities and Exchange Commission (SEC) is expected to broaden temporary limits on short-selling beyond 19 financial companies, it recently announced. The limits expire Tuesday (The Wall Street Journal July 28). Under short-selling, traders sell borrowed stock while assuming the price will decline, and the stock can be repurchased at a lower price. The SEC is working to make its short-selling rules permanent, and was expected to recommend options to commissioners this week ... * WASHINGTON (7/29/08)--Ken Wilson, a Goldman Sachs Group executive, will take a leave of absence to join the Treasury Department as a housing crisis adviser (Inside Washington July 28). The Federal Deposit Insurance Corp. also announced that Arthur Murton will act as interim chief operating officer until John Bovenzi, who is running IndyMac, returns to his post ... * WASHINGTON (7/29/08)--The U.S. Treasury Department issued a best practices report for residential covered bonds Monday. The document aims to provide clarity and homogeneity to the market, define a starting point for the U.S. covered bond market, and serve as a complement to the Federal Deposit Insurance Corp. final policy statement, the department said ... * WASHINGTON (7/29/08)--The Community Development Financial Institutions (CDFI) Fund announced Monday that organizations that are not certified CDFIs and intend to apply for financial assistance in 2009 must submit a certification application by Oct. 1. Certified CDFIs that intend to apply for financial assistance next year must submit a certification of material events by Oct. 1 ...

Federal regulators take over two banks

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WASHINGTON (7/28/08)--First National Bank of Nevada, Reno, Nevada, and First Heritage Bank, N.A., Newport Beach, Calif., were closed Friday by the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver. First National Bank’s primary markets extended throughout Nevada and Arizona. The bank, with approximately $3.4 billion in assets, was chartered as a national bank in 1987. On June 30, 2008, an affiliate of the bank, known as the First National Bank of Arizona, Scottsdale, Arizona, was merged into First National Bank of Nevada. The OCC said it acted after finding that the bank was “undercapitalized and had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices.” The regulator also said it found the bank had incurred and is likely to incur losses that “will deplete all or substantially all of its capital, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance.” “The bank’s unsafe and unsound practices also weakened the bank’s condition and seriously prejudiced the interests of the bank’s depositors and the deposit insurance fund,” according to the OCC. First Heritage Bank, with approximately $250 million in assets, was chartered as a national bank in 2005. The OCC said it acted after finding that the bank was “critically undercapitalized.” The OCC also said the bank had “incurred and is likely to incur losses that will deplete all or substantially all of its capital, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance.”

Audio conference addresses credit card overdraft regs

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WASHINGTON (7/28/08)--Credit unions interested in the proposed credit card and overdraft protection regulations can participate in today’s audio conference hosted by the Credit Union National Association (CUNA). The National Credit Union Administration (NCUA), along with the Federal Reserve Board (Fed) and the Office of Thrift Supervision, has published a joint proposed rule that will prohibit a number of credit card practices and will impose restrictions on overdraft protection plans. The Fed has also published two separate but related proposals that amend Regulation Z, the Truth in Lending Act, Regulation DD, and the Truth in Savings Act. The conference is from 1-2:30 p.m. CT. Panelists include:
* Matt Biliouris, NCUA program officer in the Office of Examination & Insurance; * Alan Cameron, president/ CEO of the Idaho Credit Union League; * Mary Dunn, CUNA senior vice president and associate general counsel of regulatory advocacy; * Tonya Green, NCUA staff attorney in the Office of General Counsel; * Ross Kendall, NCUA Office of General Counsel; and * Mike Long, vice president of lending at UW CU, Madison, Wis.
A speaker from the federal reserve board also will participate. Use the resource link below for more information and to register.

House panel to consider credit card bill this week

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WASHINGTON (7/28/08)--The House Financial Service Committee Tuesday is scheduled to markup a package of credit card reforms which is being billed as the Credit Cardholder's Bill of Rights (H.R. 5244). The bill, introduced by House Financial Services subcommittee on financial institutions and consumer credit chair Carolyn Maloney (D-N.Y.), is intended to curb abusive practices, such as some interest-rate increases and late fees. The subcommittee held its first hearing on it on March 13. In part, the bill would require card issuers to provide a 45-day notice period for consumers before an interest rate could be increased. Cardholders would then have the right to cancel their card and pay off their existing balance at the existing rate and repayment schedule. H.R. 5244 would also prohibit a practice known as "double-cycle billing," in which card companies charge interest on payments made on time during a grace period. It would also ban arbitrary changes in the credit card contract. The Credit Union National Association (CUNA) generally supports legislative action that protects consumers from predatory lending practices, but also monitors this type of legislation to ensure that it does not have an unintended consequence which would hamper credit union service to their members. CUNA Vice President of Legislative Affairs Ryan Donovan has noted that, while credit unions are not the target of these bills, the legislation may affect credit card programs that credit unions offer their members.

Inside Washington (07/25/2008)

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* WASHINGTON (7/28/08)--Rep. David Dreier (R-Calif.) has introduced legislation that would help the Federal Deposit Insurance Corp. (FDIC) protect the deposits of a bank facing financial crisis. The bill, the FDIC Flexibility Act of 2008, repeals the “low-cost solution” provisions that require the FDIC to choose the solution with the lowest cost to the banking fund when resolving an institution. “The problem is that what might be a low cost solution for a particular institution might not always be the best or fastest way to ensure that depositors have access to their funds,” according to a statement on the congressman’s website ... * WASHINGTON (7/28/08)--Nehemiah Corp. of America is fighting against a provision in a housing bill that would prohibit seller-funded down payment assistance. The provision would put Nehemiah and other providers out of business (American Banker July 25). Scott Syphax, Nehemiah’s CEO, said the Department of Housing and Urban Development (HUD) overstated the number of loans that have defaulted from seller-funded down payment programs. The Federal Housing Administration said loans from programs such as Nehemiah’s are three times more likely to go into foreclosure, but Syphax said the data the agency used was unreliable. HUD tried to eliminate the assistance program last year, but Nehemiah filed a lawsuit ... * WASHINGTON (7/28/08)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair reiterated the rights of insured depositors in an opinion piece published Thursday by Reuters. She said the FDIC has a “promise to keep to our nation’s bank customers,” and spelled out FDIC depositors’ bill of rights ...

Foreclosure forbearance urged until law takes effect

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WASHINGTON (7/28/08)--Federal lawmakers Friday called on the mortgage industry to delay or cancel foreclosures until a new law designed to refinance in-trouble borrowers goes into effect on Oct. 1. The new legislation, which is expected to be signed by President George W. Bush, will allow qualified applicants to refinance into FHA-insured mortgages and avoid foreclosures. House Financial Services Committee Chairman Barney Frank (D-Mass.) and Housing and Community Opportunity Subcommittee Chairwoman Maxine Waters (D-Calif.) through a press release urged the mortgage industry to work with borrowers who can take advantage of the new refinancing program. Chairman Frank will hold a hearing in September to monitor the progress of loan modification by mortgage servicers. “I would hope that no one would be foreclosed upon between now and October 1st who would have qualified for this program had the effective date been immediate,” cautioned Frank. “And that is within your power to do. You can show some forbearance.” To qualify for FHA refinancing under this program, borrowers must have more than 31% of their monthly income dedicated toward their mortgage payment as of March 1, 2008, and live in their only home. Borrowers would have to meet the specific qualifications of the FHA program, and would have to agree to share future home appreciation with the government. Lenders would also have to agree to significant reductions in the amount owed to them. The Congressional Budget Office estimates that at least 400,000 families will avoid foreclosure at no cost to the taxpayer. In addition, Frank also called for restructuring the mortgage servicing industry if servicers fail to cooperate in aggressively forbearing and preventing foreclosures.

Hood explains federal CU share insurance in video

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ALEXANDRIA, Va. (7/28/08)--National Credit Union Administration (NCUA) Vice Chairman Rodney Hood appears in a new online presentation that explains credit union share insurance. The presentation is derived from comments Hood made last spring during an appearance on “Home and Family Finance Radio,” presented by America’s Credit Unions. He answers questions--that the agency says consumers have been posing lately--in a three-minute audio/video presentation now playing on CUNA’s consumer website, www.creditunion.coop. In the presentation, Hood explains in clear, familiar terms, how credit union savings are federally insured by NCUA, the role of NCUA as the federal savings insurer of credit unions, and the scope of federal share insurance. Use the link below to watch the complete video.

Indiana CUs FOM expansion request OKd

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Click to view larger image From left: NCUA Board Vice Chair Rodney Hood, Chairman JoAnn Johnson and Board Member Gigi Hyland prepare to consider the field of membership request for Horizon One FCU in Indianpolis, Indiana. (Photor provided by CUNA)
ALEXANDRIA, Va. (7/25/08)--The National Credit Union Administration (NCUA) Board unanimously approved an application from Horizon One FCU, Indianapolis, Indiana, for a community charter to serve persons who live, work, worship, attend school in, and businesses and other legal entities located in Marion or Johnson Counties, Indiana. Horizon One has $68 million in assets and nearly 12,000 members. It had a multiple group membership, primarily involving transportation equipment. NCUA said data demonstrates the two counties are “a single, well-defined local community where residents have common interests or interact.” The total population of the proposed service areas based on 2006 Census Data is 998,820.

NCUA seeks executive approval for new seal

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ALEXANDRIA, Va. (7/25/08)--The National Credit Union Administration (NCUA) Board gave provisional approval for a new seal that the agency says will better convey the NCUA’s connection with the federal government. The goal of the new proposed seal, which closely resembles other federal agency seals, is to ensure that NCUA is more clearly recognized by members of Congress, other agencies and the general public as an entity of the United States government. The change would not impact the blue rectangular federal insurance sign federally insured credit unions’ must display. NCUA moved to ask President George W. Bush for an executive order approving the new seal, an action which NCUA staff said was likely necessary since President Richard Nixon had issued an executive order establishing the current seal in 1971. Chairman Johnson noted that the current seal had lead to some confusion regarding whether or not NCUA was a government agency. A new seal for NCUA is a conscious effort to make clear NCUA’s status as a federal regulator and insurer, according to NCUA Chairman JoAnn Johnson. “I believe that heightening this awareness with lawmakers, the media and, perhaps most importantly, the American consumer will act to promote confidence in federally insured credit unions,” she said. “This has become especially critical during these times of difficulty in other segments of the financial services marketplace.” The agency is expected to incur a relatively small cost in making this change, around $37,000 for use on NCUA publications, agency signs, flags and similar indicia. Credit Union National Association Deputy General Counsel Mary Dunn said the association generally agreed with the agency’s assessment for a new seal.

NCUA says it will try to avoid insurance premiums

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Click to view larger image NCUA Chief Financial Officer Mary Ann Woodson readies an overhead presentation to the NCUA Board yesterday. (Photo provided by CUNA)
ALEXANDRIA, Va. (7/25/08)--During National Credit Union Administration (NCUA) Chairman JoAnn Johnson’s final open board meeting yesterday, staff told the board the agency was trying to avoid the need for share insurance premiums this year, but that staff would reevaluate the situation by the end of the year. Dave Marquis, NCUA director of the Office of Examination and Insurance, and Mary Ann Woodson, NCUA chief financial officer, presented the report on the National Credit Union Share Insurance Fund (NCUSIF). There currently are 245 CAMEL 4 and 5 credit unions, up from 211 at the end of 2007. These credit unions account for only 1.37% of total insured shares. The NCUSIF’s equity level currently stands at 1.24% and is expected to be at 1.28% at the end of this year, said Marquis.
Click to view larger image Click for larger view
While a dividend is not anticipated, Marquis noted that the economy is currently “unfavorable” and that avoiding a premium is therefore their goal. He explained to the board that credit unions had increased average net worth up to 11.4%. This means--even though the NCUSIF remains in the “zone” where a discretionary insurance premium is possible--NCUA staff is optimistic about the overall health of the credit union system. Agency staff did note, however, that there are currently 15 large “problem” credit unions--those rated CAMEL 4 or 5. That number is up from 12 in 2007.
Click to view larger image During yesterday's monthly board meeting, NCUA director of the Office of Examination and Insurance Dave Marquis, left, and CFO Mary Ann Woodson address the possibility of insurance premiums this year. (Photo provided by CUNA)
Johnson asked NCUA staff to explain why NCUSIF losses so far this year had been higher than originally projected. Woodson explained that this year’s losses so far this year had been more than two standard deviations higher than the ten-year average and that the higher than projected loss expense level primarily resulted from a single credit union. Use the links below to access the NCUSIF reports from NCUA.

Amended post-merger net worth definition proposed

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Click to view larger imageDuring her last NCUA Board meeting, Chairman JoAnn Johnson listens to agency staff explain proposed changes to the definition of net worth following a credit union merger. (Photo provided by CUNA)
ALEXANDRIA, Va. (7/25/08)--The National Credit Union Administration (NCUA) board yesterday voted unanimously to propose changes to the prompt corrective action (PCA) definition of a natural person credit union’s “net worth” to include as capital the retained earnings of a credit union that is merging into it. The changes would be consistent for corporate credit unions as well. The agency will accept comments on the proposal for 60 days after publication in the Federal Register. At the time PCA requirements were mandated in 1998 by the Credit Union Membership Access Act, the “pooling method” was used for the financial reporting of a credit union merger. This allowed the acquiring credit union to combine its own retained earnings with that of the merged credit union for determining the post-merger net worth ratio for purposes of complying with PCA requirements. In 2001, Financial Accounting Statement (FAS) No. 141 replaced the “pooling method” with the “purchase method” for business combinations, with the effect that an acquirer’s net worth would not increase as a result of the merger. This potentially reduces the post-merger net worth. This was applied to mutual combinations, such as credit union mergers, in 2007, and is to be effective in fiscal years beginning after December 15, 2008. The Financial Services Relief Act of 2006 essentially reverses this policy by expanding the PCA definition of “net worth” to incorporate the retained earnings of the merged credit union. This would also apply to other combinations, such as purchase and assumption transactions. These changes will only apply to measuring capital under PCA and will not apply for other financial reporting purposes. NCUA staff members told the board that credit unions have a more limited statutory definition of “net worth” than banks and thrifts do and that--had credit union net worth been defined in a manner similar to the definition applicable to banks and thrifts--the “congressional fix” for the “merger accounting problem” would not have been necessary.
Click to view larger imageFrom left: Federal Housing Finance Board Director and former NCUA board member Geoff Bacino, CUNA Deputy General Counsel Mary Dunn and NCUA Vice Chairman Rodney Hood before Thursday's monthly agency board meeting. (Photo provided by CUNA)
NCUA staff also noted that the new regime for net worth calculation in mergers would not reinstate the “pooling method” but would have a similar practical effect. Also during yesterday’s meeting, the NCUA Board approved guidance for the provisions in the Federal Credit Union Act that prohibit persons convicted of certain criminal offenses from participating in the affairs of the credit union.

Inside Washington (07/24/2008)

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* WASHINGTON (7/25/08)--Independent presidential candidate Ralph Nader wrote letters to Sen. Christopher Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), suggesting that they hold hearings on the Federal Deposit Insurance Corp.’s (FDIC) ability to deal with potential bank failures. While 99% of insured institutions meet the “well capitalized” criteria, the possibility remains that the fund could suffer insurance losses that are significantly higher than anticipated, Nader wrote. He also included 10 questions in the letter that should be posed to FDIC officials. “The FDIC is not likely to address its own inability to clearly assess the current risks posed to depositors and taxpayers by the high-rolling banking industry,” he said ...

Housing bill approved by House Senate action expected

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WASHINGTON (7/24/08)—A broad housing bill intended to address the county’s current mortgage foreclosure problems was passed by the House 272-152 Wednesday. At the heart of the bill is a provision drafted to help borrowers holding $300 billion of troubled mortgages avoid foreclosure by allowing the Federal Housing Administration to insure the loans after reductions in principal. The bill also, among other things, includes public-confidence builders for Fannie Mae and Freddie Mac, proposed by U.S. Treasury Secretary Henry Paulson. For instance, the bill (H.R. 3221) increases the government-sponsored enterprises’ (GSEs’) line of credit. It also gives Treasury authority to purchase the GSEs’ equity. Both measures are effective for just 18 months. The bill also establishes a new regulator for Fannie and Freddie. The bills also creates a Fannie- and Freddie-supported affordable housing fund, as well as authorizes additional funding for community development block grants and expands opportunities for housing counseling for consumers. Another provision sets the conforming loan limits for Freddie and Fannie at the lower of $625,500 or 115% of an area’s median house cost. The new limit would go into effect when a current temporary increase expires at the end of the year. The Senate is expected to quickly follow the House with an affirmative vote on the package—which represents a laboriously sought-after compromise between the House and Senate. As if acknowledging the ping-pong nature of recent negotiations, the House clerk, on the voting calendar, described the House considerations Wednesday this way:
* H. Res. 1363: providing for consideration of the Senate amendment to the House amendments to the Senate amendment to the bill ( H.R. 3221) to provide needed housing reform and for other purposes.

House approves MSB bill to clarify compliance questions

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WASHINGTON (7/24/08)— The Money Services Business Act (H.R. 4049) was approved by the U.S. House of Representatives Tuesday by voice vote. The bill clarifies that credit unions and banks that serve a money services business (MSB) are not responsible for that entity’s compliance with anti-money laundering laws and any other applicable Bank Secrecy Act (BSA) requirements. MSBs are nonbank financial institutions that provide one or more of such services as money orders, traveler's checks, money transmissions, check cashing, currency exchange, currency dealing, or issuing, selling or redeeming stored-value cards. The bill was introduced in 2007 by Rep. Carolyn Maloney to address situations in which financial institutions could feel pushed to discontinue relationships with MSBs because of a lack of regulatory guidance about compliance liability. Although the bill was considered noncontroversial in the House and therefore placed on the Suspension Calendar for a quick vote, the fate of the legislation for the year is unclear because of the tight legislative calendar. The bill must now be taken up by the Senate. Yet, but both houses of Congress intend to adjourn for the year in late September because of the upcoming federal elections. Any bill not passed into law by then would have to be re-introduced in the new 2009 111th Congress.

Inside Washington (07/23/2008)

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*WASHINGTON (7/24/08)—The Federal Deposit Insurance Corporation is taking a close look at what IndyMac Federal Bank, the resultant institution created after the failure of IndyMac Bancorp, can offer a potential buyer and whether the bank should be sold as a whole or in parts. (American Banker July 23) Among the thrift’s advantages are: an established branch network, a large servicing portfolio, and a reverse mortgage business. John Bovenzi, the FDIC's chief operating officer and chief executive of IndyMac Federal, acknowledged in an interview that loans may not get full value, but added that the FDIC will assess the best way to market and try to get that value back. But the housing crisis will make it difficult for IndyMac to realize a good price because its specialty, alternative-A mortgages — including a chunk of payment-option, adjustable-rate mortgages — are fetching low prices. Yet, the FDIC is already acting to preserve the thrift’s value for a sale; it is paying competitive rates on certificates of deposit to bolster a deposit network that spans Southern California. Bovenzi also mentioned IndyMac's $185 billion servicing portfolio and its reverse mortgages subsidiary, Financial Freedom, as attractive parts of the whole. He said no decision has been made yet on whether to sell the bank as a whole or in pieces... * WASHINGTON (7/24/08)—Although a report that that the Federal Reserve Board and Office of the Comptroller of the Currency were “inspecting the books” at Freddie Mac and Fannie Mae was slightly off the mark, those agencies are consulting with the government-sponsored enterprises' regulator. The Fed and OCC want to understand whether the companies' problems are likely to affect commercial banks; they are concerned about billions of dollars worth of GSE debt on the books of banks. The OCC acknowledged "providing support" to the Office of Federal Housing Enterprise Oversight; members of the Fed staff have said they joined the OCC at OFHEO last week. And worry doesn’t stop there: The Office of Thrift Supervision requested information from thrifts in the Southeast regarding their investments in the government-sponsored enterprises. (American Banker July 23)... * WASHINGTON (7/24/08)—Interested parties have until Oct. 15 to comment on recently release Basel guidelines on calculating risk of assets that are losing value but not actually going into default. The Basel Committee on Banking Supervision released guidelines this week. They have been in development since July 2005, but in March international regulators began to make adjustments in acknowledgement of market turmoil. A document released by those regulators said the committee decided to expand the scope of the capital charge to better capture both prices changes attributable to defaults, as well as other sources of price risk. Those other sources of risk were defined as such things as credit migrations and significant changes in credit spreads and equity prices. The 12 largest banks in the U.S. are required to start implementing some provisions of Basel II this year. (American Banker July 23)…

Inside Washington (07/22/2008)

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* WASHINGTON (7/23/08)--As members of Congress work to pass a housing package this week, the Bush administration remains poised to veto the measure if it includes a provision that allows state and local governments to buy and resell foreclosed properties, said White House spokesperson Dana Perino. The provision would cost $4 billion (American Banker July 22). The package would give the Federal Reserve Board oversight over Fannie Mae and Freddie Mac, and allow the Treasury to purchase the enterprises’ debts. Lawmakers, including Sen. Christopher Dodd (D-Conn.), Rep. Barney Frank (D-Mass.)., and Sen. Richard Shelby (R-Ala.) appear willing to compromise on several issues, such as raising the loan limits for Fannie Mae and Freddie Mac. Frank, who had pushed for a six-month delay on the effective date for the enterprises’ regulation, has now eased off, saying the effective date is no longer an issue ... * WASHINGTON (7/23/08)--The health of mortgage finance enterprises will be key to the U.S.’s economic recovery, Treasury Secretary Henry Paulson said in a speech at the New York Public Library (Reuters July 22). The country’s financial markets likely will remain stressed until the housing market improves, and Fannie Mae and Freddie Mac are needed to finance mortgages, he added. The Treasury has proposed expanding the enterprises’ access to government loans, a measure that Congress will consider this week. Improved regulatory structure to mitigate risk from nonbank institutions also is needed to prevent a failing institution from triggering a systemic event, he said ...

Mortgage servicing foreclosures subject of House hearing

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WASHINGTON (7/23/08)—The House Financial Services Committee has announced a July 25 hearing to review mortgage servicing practices and foreclosure mitigation. Specifically, the committee intends to examine the role of mortgage servicing in the foreclosure crisis, focusing on ongoing problems with loan modifications, and the need for improvements in servicing practices and responsiveness to consumers. A witness list has not yet been made public.

New FinCEN BSA e-filing required by new year

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WASHINGTON (7/23/08)—By the first of next year, the Financial Crimes Enforcement Network (FinCEN) will require any electronic filing of Bank Secrecy Act (BSA) information to be executed through a new BSA Electronic Filing program. As part of its effort to make BSA filing requirements more secure, efficient, and effective, FinCEN announced this week that it will retire its current BSA Magnetic Media Filing Program in favor of the new system. The magnetic media filing has required credit unions and other financial institutions to submit BSA reports using tapes and diskettes. The more secure BSA E-Filing is a web-based system that is user-ID and password protected. Importantly, it does not require storage media. BSA E-Filing supports both single and multiple BSA report filings and uses the same file format as the Magnetic Media Program. FinCEN has suggested that without tapes or diskettes to mail, BSA E-Filing may help reduce reporting costs. The following forms are currently available for BSA E-Filing:
* Currency Transaction Reports (CTRs); * Designations of Exempt Persons (DEPs); and * Suspicious Activity Reports (SARs).
“Reporting institutions will also see a decrease in the time it takes to file a wide range of BSA forms and will obtain a more rapid receipt of acknowledgements,” according to a FinCEN release. FinCEN is collaborating with the Internal Revenue Service (IRS) to ensure a transition as seamless as possible. Use the resource link below to register to use BSA E-Filing.

CUNA warns of opt-out rule burdens

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WASHINGTON (7/22/08)—The Credit Union National Association (CUNA) endorsed the idea behind a Federal Reserve Board plan that would allow consumers to “opt out” of overdraft protection plans, but strongly opposed forcing financial institutions to give notice of opt-out rights to consumers in any periodic statement period in which the service is used. The repeated opt-out notices would be too burdensome for credit unions, with very little benefit for consumers, CUNA said in a comment letter sent to the Fed late last week. CUNA also believes that the proposed opt-out notice requirements should not apply at all to credit unions or other financial institutions that currently use an “opt-in” approach in which consumers affirmatively choose to enroll in these plans. “Under this approach, consumers have clearly expressed their intentions, and it is simply unnecessary to provide them with additional notices of their right to opt-out of a service in which they voluntarily elected to participate,” wrote CUNA Senior Assistant General Counsel Jeffrey Bloch. The Fed’s proposed rule to amend Regulation DD, the Truth in Savings Act, if adopted, would not apply directly to credit unions. However, the National Credit Union Administration is required to adopt substantially similar rules for federal credit unions. Also, the Fed, NCUA and Office of Thrift Supervision worked jointly on related proposed rules for unfair and deceptive practices. CUNA also will be submitting a comprehensive comment letter on this to the NCUA. “Because this (RegDD) proposal is intended to complement and be consistent with the proposal recently published by NCUA, the Board, and the OTS that addresses unfair and deceptive practices as they pertain to credit cards and overdraft protection plans, we strongly believe that the effective date of these proposals should be the same,” the CUNA letter recommended. “Furthermore,” it added, “mandatory compliance should not be required until at least two years after these rules are finalized since they are intertwined with several comprehensive proposals that will amend the Regulation Z open-end credit rules.” To read more on CUNA’s comments, use the resource link below.

Inside Washington (07/21/2008)

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* WASHINGTON (7/22/08)--According to a recent Kehrer-Jackson bank annuity sales data report, annuity sales are up 53% from last year. Regulatory agencies, including the Financial Industry Regulatory Authority and the Securities and Exchange Commission, are broadening their oversight of annuity sales and fraud, while banks such as SunTrust are working to document profiles of customers who purchase them. States such as Florida also have cracked down on annuity fraud. Florida recently enacted the John and Patricia Seibel Act, which penalizes sellers up to $250,000 for unfair annuities. The National Association of Insurance Commissioners created a Suitability of Annuity Sales Working Group in May to recommend standards for the annuity industry, modeled after Wisconsin’s annuity sales advisory committee (American Banker July 21) ... * WASHINGTON (7/22/08)--Bankers have asked the Securities and Exchange Commission (SEC) to extend a rule stopping short-selling so it would include holding companies and publicly traded banks. The American Bankers Association sent a letter to the SEC July 17 saying that the rule could cause problems for banks that aren’t included on the rule. The SEC has not commented on the letter (American Banker July 21). The rule took effect Monday ... * WASHINGTON (7/22/08)--The Federal Reserve Board is moving closer to filling a larger systemic role without input from members of Congress, Sen. Christopher Dodd (D-Conn.) noted at a hearing Wednesday. On July 13, the Treasury and the Fed proposed a plan to help Fannie Mae and Freddie Mac. The plan also would require that an agency oversee the enterprises--a role that some have suggested for the Fed. At Wednesday’s hearing, Treasury Secretary Henry Paulson signaled his support for positioning the Fed as a systemic overseer, while Ben Bernanke, Fed chairman, said the central bank must be able to fulfill that responsibility before agreeing to it (American Banker July 21). The Fed also is consulting with the Securities and Exchange Commission (SEC) on oversight of investment banks. Sen. Jack Reed (D-R.I.) said he was skeptical of that collaboration because banking agencies working together in the past missed the subprime mortgage mess ...

Durbin bill would set 36 APR consumer credit cap

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WASHINGTON (7/22/08)—Sen. Richard Durbin (D-Ill.) introduced legislation late last week that would set a federal usury cap of 36% APR on all consumer credit transactions. Durbin, who is Senate Majority Whip, said his bill is intended to eliminate “the excessive rates that some consumers are charged for payday loans, car title loans and other types of credit.” “Within blocks of my home in Springfield, Illinois, there are payday lenders charging interest rates of two and three hundred percent of the value of the loan,” Durbin said in a release. “These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least. Congress must enact protections against predatory lending. America’s working families depend on it.” Called the Protecting Consumers from Unreasonable Credit Rates Act, the bill’s lending cap takes into account all interest, fees, defaults, and other finance charges. The bill clarifies that the cap does not preempt any stricter state laws. Durbin noted that his proposed cap is similar to usury caps already enacted in many states and is the same as the cap already in place for military personnel and their families.

NCUA reviews options in court FOM decision

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ALEXANDRIA, Va. (7/22/08)—The National Credit Union Administration (NCUA) said Monday that it is currently reviewing a U.S. District Court decision that the agency’s approval in 2003 of a six county area in South Central Pennsylvania was “arbitrary and capricious.” An agency statement said the NCUA is disappointed in the decision, but noted that “this decision did not challenge NCUA’s community charter regulations.” “Rather it was a fact-specific challenge to the granting of a six county community in Pennsylvania and affects only those credit unions serving that community,” the NCUA pointed out. The case was known as American Bankers Association vs. NCUA. The court has asked parties to the suit to file briefs addressing the appropriate remedy. (See related story: Court rules against NCUA in Pa. FOM case.)

Court rules against NCUA in Pa. FOM case

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WASHINGTON (7/22/08)--The Credit Union National Association (CUNA) Monday expressed disappointment in a federal court ruling that the National Credit Union Administration’s record was not sufficient to sustain its decision granting a six-county area community credit union expansion in Pennsylvania. However, CUNA pledged to begin work immediately to help credit unions deal with the judge’s order. CUNA President/CEO Dan Mica stated Monday: “We are certainly disappointed that the court has made this decision, but we are focusing on the next steps. Right now, our top concern is to work with the credit unions, the Pennsylvania Credit Union Association and (National Association of Federal Credit Unions) NAFCU to help the credit unions deal with the judge’s order. “Above all, we are concentrating on the credit unions’ abilities to continue providing needed services to consumers, and for existing members to continue receiving those services from credit unions.” Rick Wargo, executive vice president and general counsel of the Pennsylvania CU Association, concurred: “We note Judge Kane did not prescribe a remedy. We will work with the three credit unions and NCUA on the remedy phase of the case in an effort to mitigate the decision.” The decision, issued by Chief Judge Yvette Kane for the U.S. District Court, Middle District of Pennsylvania, involved a lawsuit filed by the American Bankers Association and the Pennsylvania Bankers Association. The bankers argued that the NCUA acted in an arbitrary and capricious way in 2003 when it approved Harrisburg, Pa.-based Members 1st FCU’s charter request. The agency decision was later used as basis to authorize two other charter requests, one from New Cumberland FCU and the other from AmeriChoice FCU. The court concluded that “under all the circumstances, the decision of the NCUA is arbitrary and capricious and must be set aside.” The court determined that “after a careful review of the record, that the NCUA’s analysis is insufficient in this case…” The Court determined the analysis was not adequate on two grounds:
* NCUA did not provide an explanation for discrediting evidence that was contrary to its findings that the area constituted a single trade area and; * The agency did not explain why it ignored the existence of numerous political jurisdictions in approving the application for Members 1st, which was then relied upon by the other two credit unions to expand. NCUA had previously rejected Members 1st applications for an eight county area and then a six county area, before the final application was approved in April 2003.
(See related story: NCUA reviews options in court FOM decision.)

Mica to Congress CUs are safest deposit institutions

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WASHINGTON (7/21/08)--Credit Union National Association (CUNA) President/CEO Dan Mica on Friday reassured Congress that America’s credit unions “remain healthy, vibrant, and well capitalized.” Mica told each member of the House and Senate in a letter that the failure of IndyMac--not surprisingly--has led the media and the public to question the safety of their money in depository institutions. “I am proud to report that America’s credit unions remain the safest of all depository institutions,” said the CUNA leader. “Credit unions have weathered every financial storm since the Great Depression without ever costing the American taxpayer a dime in any bailout.” Mica’s letter with an attached CUNA fact sheet also were sent to the lawmakers’ legislative directors in Washington, as was well as their district directors back home. The credit union leader reiterated that deposits in all federally chartered credit unions and virtually all state chartered credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF). “Credit unions remain the most tightly regulated and well-capitalized of all depository institutions and provide the same level of deposit insurance as their bank and thrift counterparts,” underscored Mica to the lawmakers. Use the link below to access CUNA’s fact sheet: “America’s credit unions: Secure, strong.”

House Financial Services sets second financial markets hearing

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WASHINGTON (7/21/08)--New York Federal Reserve President Timothy Geithner and Securities and Exchange Commission Chairman Christopher Cox will testify Thursday at a second in a series of hearings on policy implications of the transformation of domestic and international financial markets. House Financial Services Chairman Barney Frank (D-Mass.) announced in June that his panel would conduct a number of investigative sessions—starting in July and running into the Fall. The hearings will to examine the ability of the regulatory structure to assess and mitigate systemic risk, especially in light of the collapse of Bear Stearns, in order to avoid a similar or more serious crisis in the future, according to a committee release. Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke appeared at the first of this series of hearings on July 10. The committee has announced that it plans to invite other federal regulators, academics, economists and market participants to present views at subsequent hearings.

All-borrower data collection may be a Frank 09 priority

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WASHINGTON (7/21/08)—House Financial Services Committee Chairman Barney Frank last week seemed to endorse the idea of a public reporting system on race and gender data for all borrowers, much like Home Mortgage Disclosure Act provisions require for mortgage borrowers. “I would just say with regard to collection of this data, I’ve seen this movie before and it has a happy ending,” he said during Thursday’s hearing on the subject by the Financial Services subcommittee on oversight and investigations, chaired by Rep. Mel Watt (D-N.C.). The “movie” Frank referred to was the long and contentious battle in the 1980s that preceded the enactment of HMDA, a law that many credit with having taken a huge bite out of discriminatory lending practices. An article in the July 18 issue of American Banker, in fact, said the Massachusetts Democrat pledged to make the reporting issue a priority early next year. "I can guarantee this will be very high in this committee's agenda in 2009," the article quoted Frank as saying. Use the resource link below to read more about the subcommittee hearing.

Housing bill could move to Presidents desk this week

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WASHINGTON (7/21/08)—A comprehensive housing rescue plan may be sent to the President’s desk to be signed into law this week, according to Credit Union National Association (CUNA) Senior Legislative Representative John Hildreth. Hildreth said the bill will include a plan offered by U.S. Treasury Department Secretary Hank Paulson to bolster confidence in secondary mortgage industry giants Fannie Mae and Freddie Mac. “Because the Bush administration wants Congress to act quickly to give Treasury emergency powers to lift the cap on Fannie and Freddie's line of credit at Treasury and also to allow Paulson to purchase equity in the two (government-sponsored enterprises) GSEs, the bill takes on added urgency and could soon be passed by the Congress and signed into law,” Hildreth noted. In broad terms, this omnibus housing bill would allow the Federal Housing Administration (FHA) to refinance $300 billion worth of subprime mortgages to assist some of the country's 2.2 million borrowers expected to face the threat of foreclosure on their homes over the next few years. The bill also modernizes the FHA as well as the regulatory structure of the GSEs. CUNA supports the overall bill but has lobbied against certain provisions in the legislation, such as the national registration of bank and credit union loan originators, a new IRS reporting requirement for payment card processors, and a cumbersome GSE product approval process. Key lawmakers continued to work on a compromise last week and emerged from closed-door sessions last week saying they were inching toward a deal on the bill. (American Banker July 18). At that time the House was expected to vote on a final bill by July 23, and the goal was for the Senate to accept it shortly thereafter without making changes.

U.S. appeals court says CU can sue over data breach

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WASHINGTON (7/21/08)—In an important decision for credit unions, a U.S. court of appeals last week threw out a lower court ruling that had denied Pennsylvania State Employees CU (PSECU) and Sovereign Bank standing to sue BJ’s Wholesale Club the $98,000 it spent replacing member credit cards after customer data was stolen from the retailer. The credit union had tried to recover the $98,000 from both the retailer and its merchant bank, Fifth Third Bank, through negotiations. More than 235,000 credit and debit cards total were reissued, and nearly 1,000 accounts were affected by illegal purchases made by thieves. The $3.13 billion Harrisburg, Penn.-based credit union ultimately filed suit against the retailer and bank in U.S. Middle District Court in 2004. In last week’s decision by the United States Court of Appeals, The Hon. William W. Caldwell said the 2006 district court ruling granting summary judgment to Fifth Third Banks is reversed. The judge remanded the cased for further proceedings regarding the breach of contract claim. PSECU President/CEO Greg Smith said the credit union plans now to return to the District Court for a jury trial--which his credit union originally requested. "I think jurors will understand the issues pretty easily," said Smith. "Our counsel may also pursue an expanded complaint--not just the breach of contract issue." Rick Wargo, executive vice president/general counsel for the Pennsylvania CU Association, has said of the case, “PSECU’s litigation is significant in terms of allocating the responsibility for compliance on the appropriate parties, in this case merchants or retailers.” Wargo told News Now Friday, “PSECU is painstakingly doing some pioneering work to make the payment system a better place for all financial institutions.” Also commenting on the appeals court’s ruling, Credit Union National Association CUNA Deputy General Counsel Mary Dunn said, "In making his decision, the judge relied on the 1993 Visa operating rules and other evidence indicating that PSECU was an intended beneficiary of the agreement between Visa and Fifth Third Bank that the bank would ensure BJ's complied with the operating rules, including those involving data security. PSECU presented its argument well and the court agreed."

Inside Washington (07/18/2008)

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* WASHINGTON (7/21/08)--Federal Deposit Insurance Corp. (FDIC) officials are defending the way they handled the IndyMac crisis, though they have acknowledged they were not prepared for it (American Banker July 18). The agency has blamed extensive television coverage of the crisis for scaring consumers into thinking they would not have access to their money. FDIC Chairman Sheila Bair said the agency is monitoring the crisis, and doesn’t forsee a liquidity crisis because of it. Calif. State Rep. Ted Lieu (Calif.) said he thought the FDIC did a satisfactory job handling the crisis, although he said FDIC officials could have done better. James Barth, Auburn University finance professor, said the FDIC has not adequately explained deposit insurance to bank customers. Bert Ely, an Alexandria, Va.-based banking consultant, said the Office of Thrift Supervision (OTS) and the FDIC didn’t understand IndyMac’s problems quickly enough. Sen. Charles Schumer (D-N.Y.), has been blamed for triggering the panic by sending a letter to the OTS about IndyMac’s condition, but Ely said the bank failure could have happened regardless ...

Johnsons last meeting sees broad agenda of issues

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ALEXANDRIA, Va. (7/18/08)—Presiding over her last agency open meeting, National Credit Union Administration (NCUA) Chairman JoAnn Johnson next week will guide her board through discussions of a broad array of topics. Slated for the July 24 meeting are a report on the state of the federal share insurance fund, action on a proposed definition change under prompt corrective action (PCA) rules, and a decision whether or not to pursue design of a new agency seal. The National Credit Union Share Insurance Fund (NCUSIF) accounting is not likely to hold major surprises. Earlier this week Johnson released mid-year data indicating the fund stands strong with an equity ratio estimated at 1.24% for June 30. The NCUA Board will also consider whether to adopt its proposed guidance on provisions in the Federal Credit Union Act that prohibit persons convicted of criminal offenses from participating in the affairs of a federally insured credit union. Federal bank and thrift agencies have provided guidance to their regulated financial institutions on the prohibitions and NCUA is considering following suit. A final item to be considered; a request from Horizon One FCU to convert to a community charter. Horizon One CEO Ann Garmon confirmed Thursday that the agenda item refers to her Indianapolis, Ind. credit union. Horizon One has almost $68 million in assets and 11,347 member. “I am really pleased to be able to be on this agenda. We have worked long and hard to get there,” Garmon said. The credit union currently has a multiple group membership, primarily involving transportation equipment. On the topic of NCUA chairmen, although board member-designate Michael Fryzel met with Johnson and senior NCUA staff during a two-day visit to Washington this week as part of his preparation for assumption of the NCUA chairmanship later this month, the agency said he is not expected to attend next week’s meeting. An agency spokesman said that Fryzel’s swearing-in date has not been finalized, but it will be before the end of July.

CUNA Mutual Group warns of info-reporting risks to CUs

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WASHINGTON (7/18/08)—Credit unions must guard against possible lawsuits by knowing how to properly report member information to credit bureaus, warns CUNA Mutual Group in a recent risk alert.
click to view the video Click to view the video
The Fair Credit Reporting Act (FCRA) requires credit unions-- as furnishers of information to consumer reporting agencies--to report accurate information, conduct prompt investigations in the event of a dispute, and to correct any reporting errors. CUNA Mutual notes that lawsuits have cropped up in several states. The suits target credit unions for alleged mistakes made reporting member debts that had been discharged in bankruptcy. They contend that charged-off debt was reflected as still being owed. The resulting negative impact of such a mistake to a member could include lower credit scores and a resulting higher interest rate, higher costs in various in other types of consumer transactions, such as insurance, and denied credit, according to CMG. Other damages alleged in suits have included such things as embarrassment, defamation, mental anguish, emotional distress, and inconvenience, the alert adds. To avoid problems, CUNA Mutual recommends credit unions take the following steps:
* Know who at your credit union is responsible for assuring correct information is reported to credit bureaus. Have detailed procedures for handling credit reporting, bankruptcy credit reporting, disputes, and potential identity theft issues. Knowledge of proper terminology and coding for applicable data fields is essential. * Be familiar with, and understand, various codes used by credit bureaus you work with. Ensure proper codes are provided for each consumer. Adhere to industry standards for the reporting of accurate, complete, and timely credit information. * Assure that credit union staff works with credit bureau staff to ensure correct bankruptcy reporting. The bureaus may also have resources available that can audit and provide summaries to verify how information is being reported. * Check with the credit bureau on reporting procedures for an unusual situation or with questions on reporting. Bureaus are generally very willing to work with credit unions they serve because it keeps both parties out of regulatory trouble. * Have follow-up procedures in place for times when your credit union is notified that a reporting mistake has been made. Make necessary changes on your in-house system so misreporting does not resume the month after the manual change is made.
Valerie Moss, director of compliance information for the Credit Union National Association (CUNA), encourages credit unions to bone up on credit bureau reporting issues, especially the subject of the CMG alert. “CUNA’s compliance department has fielded questions from a number of credit unions lately on how to properly report bankruptcies to credit bureaus.”

Inside Washington (07/17/2008)

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* WASHINGTON (7/18/08)--The Senate Banking Committee is granting Sen. Charles Schumer’s (D-N.Y.) request to hold a hearing on the IndyMac failure (American Banker July 17). IndyMac was shut down last week by the Office of Thrift Supervision (OTS). The OTS and Schumer blame each other for the bank’s closing ... * WASHINGTON (7/18/08)--The Federal Reserve Board is trying to ensure that financial markets improve, and that lessons learned from the IndyMac bank failure are applied to create a system that is less prone to financial problems, Fed Chairman Ben Bernanke said Wednesday. The Fed leader was questioned Wednesday about which financial institutions would receive government aid in the case of a failure. The central bank has said it would give Fannie and Freddie access to its discount window. The Treasury also has said it would serve as a backstop Fannie and Freddie ... * WASHINGTON (7/18/08)--Cerberus Capital Management will retain its control of GMAC, the Federal Deposit Insurance Corp. said this week. The FDIC granted a 10-year extension of GMAC Bank's current ownership by extending the existing disposition requirement that was established in connection with the sale of a majority stake in GMAC, the bank said in a release ... * WASHINGTON (7/18/08)--Reps. Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.), Spencer Bachus (R-Ala.) and Judy Biggert (R-Ill.) have asked that the Farm Credit Administration (FCA) drop a proposal to grant Farm Credit System lenders the ability to finance non farm projects (American Banker July 17). The lawmakers argue that the proposal strays too far from the original purpose of the Farm Credit System. The administration has received eight comment letters on its proposal, which was released for comment June 16. Ken Auer, Farm Credit Council president/CEO, said the non farm projects would benefit rural America and farmers. He said the FCA plan would be a modest way to meet existing needs... * ALEXANDRIA, Va. (7/18/08)--The National Credit Union Administration’s (NCUA) website will have limited service and all telephone and network services will be unavailable from 7 p.m. ET Friday until approximately 9 a.m. ET Saturday. The local power company is cutting power to NCUA headquarters in Alexandria for utility maintenance. The outage includes all NCUA Internet server functions, such as 5300 Call Report uploads, Financial Performance Report requests, and Find a Credit Union queries...

All-borrower race gender data collection considered

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WASHINGTON (7/18/08)–A House Financial Services subcommittee continued its investigation Thursday into the value of a public reporting system on race and gender data of for all borrowers. The subcommittee on oversight and investigations, chaired by Rep. Mel Watt (D-N.C.), used as a springboard for this session a recent Government Accountability Office report. The June report took a look at the Federal Reserve Board’s Regulation B, which implements the Equal Credit Opportunity Act (ECOA) of 1974. The Fed’s rule generally bans lenders from collecting certain data from loan applicants, and race and gender are two of the categories of prohibition. The Fed maintains that a voluntary system of data collection, one that is not publicly disclosed, could lead to the very discriminatory practices it would be intended to discourage. However, the GAO report noted others argue that the Fed’s prohibition limits the capacity of researchers and regulators to identify possible discrimination in nonmortgage lending. Sandra Braunstein, director of the Fed’s division of consumer and community affairs, testifying before the subcommittee said the Fed’s concerns about inappropriate use of information relate to data that would be collected and held, not publicly reported. She said it also applied to a system under which there would be no consistent standards or approach to data collection. Under questioning by Watt, Braunstein said that gender and race information collected and reported under the Home Mortgage Disclosure Act (HMDA) for mortgage borrowers is a “useful screening tool in fair lending examinations.” When the chairman asked the Fed representative if HMDA is a deterrent to discriminatory lending practices, Braunstein replied, “I think that is fair to say.” In assessing the cost to the industry of HMDA compliance, Braunstein said she did not have specific figures but added, “it’s pretty significant.” She predicted that that it would take “HMDA costs plus” to “put in a robust system that would valuable to people” for other borrowers. “Small business data might be more complex than that for mortgage loans,” the Fed rep suggested. She noted that it would be the role of Congress, not the Fed, to weigh the benefits, detriments, and costs of a new reporting scheme. Other witnesses included:
* Orice Williams, director of GAO’s Financial Markets and Community Investment; * Ken Cavalluzzo, research analyst, Wisconsin Capital Management LLC; * Robert F. Gnaizda, general counsel, The Greenlining Institute; * Bill Himpler, executive vice president of federal affairs, American Financial Services Association; * Jorge Corralejo, chairman, Latino Chamber of Commerce of Greater Los Angeles; and * Ann Sullivan, president, Madison Services Group.
Use the resource link below to access more testimony

Inside Washington (07/16/2008)

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* WASHINGTON (7/17/08)--The Federal Deposit Insurance Corp. (FDIC) said Tuesday it will charge higher premiums to banks who rely on secured debt and advances. Taking over a troubled institution is costly for the agency, FDIC Chairman Sheila Bair said, referencing Indymac, which was closed by the Office of Thrift Supervision last week. The bank had $10 billion worth of advances (American Banker July 16). FDIC also published a final policy statement on the treatment of covered bonds in a conservatorship or receivership, which provides guidance on the availability of expedited access to collateral pledged for certain covered bonds after the FDIC decides whether to terminate or continue the transaction ... * WASHINGTON (7/17/08)--Skeptics voiced their concerns Tuesday regarding a Treasury plan to backstop government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and create a new regulator for them (American Banker July 16). Treasury Secretary Henry Paulson said the department should have unlimited ability to buy debt from Fannie and Freddie. Sen. Richard Shelby (R-Ala.) and Sen. Jim Bunning (R-Ky.), opposed the idea. Federal Reserve Board Chairman Ben Bernanke said he thought the central bank would be helpful to a GSE regulator, while Rep. Spencer Bachus (R-Ala.) said he wasn’t sure if the GSEs’ credit needed to be expanded now that they have access to the discount window. Rep. Barney Frank (D-Mass.) said authority will be granted to the Treasury and Fed immediately, but additional regulations will happen later ... * WASHINGTON (7/17/08)--The Office of the Comptroller of the Currency will host a conference Sept. 9-10 in New Orleans on statistical analysis and modeling for fair lending risk assessment. During the conference, attendees will discuss current fair lending trends with regulators and industry experts, get an in-depth look at the OCC’s fair lending examination process, learn about credit scoring and pricing from a fair lending perspective, gain insights from bankers on their experiences with fair lending compliance and explore current issues in the consumer protection arena with representatives of the government agencies responsible for fair lending supervision and enforcement ...

Interchange bill may be dead for 08

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WASHINGTON (7/17/08)—A bill that would give merchants an antitrust exemption to negotiate interchange fees narrowly squeaked by the House Judiciary Committee Wednesday with a 19-16 vote. The committee approved a number of changes to the original bill as it marked up the Credit Card Fair Fee Act (H.R. 5546). The Credit Union National Association (CUNA) opposes government intervention in setting interchange fees. CUNA believes that the tight vote and a short remaining legislative calendar will combine to preclude a final vote on an interchange bill this year. CUNA President/CEO Dan Mica stated, “The close, 19-16 vote in the Judiciary Committee today for the Interchange Fee bill indicates that this measure may have run its course, at least for this Congress. “With such little time left for congressional action, and with other key measures waiting their turn, the bipartisan opposition – split 50-50 – to the bill makes it difficult to imagine such controversial legislation can precede much, if at all, further in the House for this Congress.” As approved, the bill would provide that credit unions regulated by the National Credit Union Administration (NCUA) and other financial institutions with under $1 billion in assets may “opt out” of interchange negotiations. The opt-out was added as an amendment offered by the committee chairman, Rep. John Conyers (D-Mich.) However, CUNA remains concerned that the opt-out option does not address credit unions’ underlying concerns with the legislation. Mica said, “As for the ‘opt-out’ provision for credit unions, we appreciate Chairman Conyers’ efforts to address credit union concerns with the bill. He was clearly listening to the significant concerns expressed loudly by credit unions. “However, we also believe that the so-called ‘opt out’ has some very practical shortcomings that make it, essentially, unworkable for credit unions.” Mica added that CUNA does not assume HR 5546 is dead, and will remain active on the Hill in “beating the legislative drums against floor consideration and passage.’ “HR 5546 is not necessary for credit unions and will work against consumers in the long run. We will continue to oppose it,” Mica added. The bill underwent other transformations during the mark-up session. The committee:
* Jettisoned a provision in the original bill that would have established a three-member panel of lawyers appointed by the U.S. Department of Justice and the Federal Trade Commission (FTC) to settle fee disputes between merchants and card providers; and * Adopted a provision that prohibit the use of an unlawful boycott by merchants under the antitrust exemption.

CU-backed candidates win Ala. Ga. races

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WASHINGTON (7/17/08)-- Two candidates with credit union support, vying for U.S. House slots in Alabama, have succeeded in their runoff races and will go on to the general election. In Alabama’s second district, State Rep. Jay Love defeated State Sen. Harri Ann Smith, a community banker, in a GOP runoff. Love next will face Montgomery Mayor Bobby Bright, a Democrat, in the November 15 election. They are vying for a House seat vacated by retiring Rep. Terry Everett (R-Ala.). In the fifth district GOP runoff, credit union-backed candidate and casualty insurance executive Wayne Parker prevailed over Huntsville-based attorney Cheryl Guthrie. Parker is seeking to replace retiring incumbent Rep. Bud Cramer (D-Ala.) and will face State Sen. Parker Griffith (D) in November. The Credit Union National Association (CUNA) and state league supported both successful candidates. Alabama CU League President Gary Wolter has said of Love and Parker that each has shown himself to be a leader who understands “credit unions, and our issues, and how important credit unions are for so many people.” In a separate race, CUNA Political Director Trey Hawkins noted that in a Georgia primary Rep. John Lewis, a Democrat, easily won what was supposed to be his toughest election in years. “All incumbents in Georgia won their primaries, but our biggest concern was the race involving Lewis, a strong supporter of credit unions,” Hawkins said noting that Lewis is one of 149 co-sponsors of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). The Georgia CU League mobilized on Lewis’ behalf providing such support as campaign volunteers. “Lewis should have no trouble in the general,” Hawkins predicted. CUNA’s Credit Union Legislative Action Council (CULAC) made contributions to the successful candidates - $10,000 to each.

NCUA liquididates tiny CU

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ALEXANDRIA, Va. (7/17/08)--The National Credit Union Administration (NCUA) announced Wednesday it has liquidated Meriden F. A. FCU. Call report data shows the Meriden, Conn. credit union was well capitalized with a 24% net worth ratio the end of the first quarter, but it appears burgeoning loan delinquencies may have sunk the tiny credit union. The agency announcement said simply that its decision to liquidate was made after determining the credit union was insolvent and had no prospects for restoring viable operations. Meriden FCU served 206 members and had assets just under $338,000 at the time of liquidation. The NCUA Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the Meriden F. A. Federal Credit Union within one week.

Fryzel Johnson work through transition

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National Credit Union Administration (NCUA) Board Chairman Designate Michael E. Fryzel (left) and Chairman JoAnn Johnson. (Photo provided by NCUA) Click for larger view
ALEXANDRIA, Va. (7/16/08)--National Credit Union Administration (NCUA) Board Chairman Designate Michael E. Fryzel met with Chairman JoAnn Johnson and senior NCUA staff during a two-day visit to Washington July 15-16, as part of his preparation for assumption of the NCUA Chairmanship later this month. "Chairman Johnson and I had an excellent discussion," said Fryzel. "It was a very useful opportunity to draw on her knowledge and experience, and she continues to be extraordinarily helpful and gracious during this transition. That discussion, along with numerous other meetings I had during my visit, will no doubt prove beneficial when I commence service as NCUA Chairman." Fryzel last month reiterated his priorities as NCUA chairman: “vigilant and thorough supervision, emphasis on safety and soundness, and dedication to protecting the consumer.” “The credit union industry, now entering its second century, has proven itself valuable to America's consumers and as such has a right to expect fair, consistent, common-sense regulation,” he said. “It is my commitment to conduct my chairmanship in that manner."

Ad touts CU opposition to interchange bill

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WASHINGTON (7/16/08)--Several Capitol Hill newspapers this week are carrying advertisements voicing credit unions’ opposition to the Credit Card Fair Fee Act (H.R. 5546), which would give merchants an antitrust exemption to negotiate interchange fees. The Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU) logos appear in the advertisements. A vote on the bill is expected today in the House Judiciary Committee. CUNA, all members of the Electronic Payments Coalition and the U.S. Department of Justice are among opponents of the "fair fee" legislation. CUNA believes regulation of interchange fees would not only harm consumers but also would adversely affect competition and technology innovation.

Conversion group quits legal challenge to NCUA

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RICHMOND, Va. (7/16/08)--Rather than disclose the identities of its membership, the Coalition for Credit Union Charter Options (CCUCO) has abandoned its appeal of a lower court ruling dismissing the group’s lawsuit against the National Credit Union Administration (NCUA). CCUCO filed its appeal earlier this year in the U.S. Court of Appeals for the Fourth Circuit, located in Richmond, Va., after a federal district court ruled Dec. 7 that the coalition lacked standing to bring suit against NCUA and dismissed the case challenging the agency's rules on credit union conversions to banks. The Credit Union National Association (CUNA) and the National Association of Federal Credit Union (NAFCU) filed a joint amicus brief in May and said the lower court’s dismissal should be upheld on appeal. The joint brief argued that the “coalition’s complaint did not identify any of its alleged credit union members, let alone any specific members that have been injured by the challenged regulations...Nor did the coalition disclose to the district court (or to this court) that its ‘members' also include banks and companies serving banks." The outcome was no surprise to CUNA General Counsel Eric Richard. “Without proper disclosure of its membership and what their true interests are, it is impossible to tell whether the coalition was acting as a representative of its alleged credit union members, or rather a stalking horse for members of the thrift banking and mutual savings bank conversion industries that seek to encourage credit unions to convert to banks," he said.

CUNA urges vote no on interchange bill

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WASHINGTON (7/16/08)—In advance of a vote expected today on the Credit Card Fair Fee Act (H.R. 5546), the Credit Union National Association (CUNA) blanketed House Judiciary Committee with letters in opposition to the bill that would give merchants an antitrust exemption to negotiate interchange fees. “We strongly urge you to oppose H.R. 5546, a bill that would negatively affect the interchange credit unions rely upon to support their debit card and credit card programs,” CUNA President/CEO Dan Mica urged in the letter sent to each member of the committee.
The CUNA letter noted that 97% of the country’s approximately 90 million credit union members belong to a credit union that issues debit cards. Eighty-three percent belong to a credit union that issues credit cards. “Credit unions can offer these products because of interchange, the transaction fee that flows from the merchant, through its bank, to the credit union that issued the card to the consumer. “Interchange helps the credit union cover its expenses and losses. Merchants benefit as they are guaranteed payment at the time the transaction is completed,” Mica wrote. But now, Mica pointed out, merchants want more and are pushing for H.R. 5546. “Under H.R. 5546, merchants win and consumers lose. Consumers will lose as credit unions reassess their ability to offer convenient debit cards and competitive credit cards as interchange is reduced under the provisions of H.R. 5546. “In addition, any reduction in interchange is not passed through to the consumer. Only the merchants win under H.R. 5546,” the CUNA leader warned. H.R. 5546 has a companion bill (S. 3086) of the same name pending action in the Senate. Additionally, Rep. Peter Welch (D-Vt.) has introduced a bill to require credit card companies to disclose their interchange rates, terms, and conditions to consumers and businesses. CUNA, all members of the Electronic Payments Coalition and the U.S. Department of Justice are among opponents of the "fair fee" legislation. CUNA believes regulation of interchange fees would not only harm consumers but also would adversely affect competition and technology innovation.

Bernanke Akaka praise CUs at hearing

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WASHINGTON (7/16/08)—Federal Reserve Chairman Ben Bernanke acknowledged credit unions Tuesday for their products that provide alternatives to high-cost payday loans. At a Senate Banking Committee hearing on monetary policy, Bernanke was queried by Sen. Daniel Akaka (D-Hawaii) about what must be done to protect consumers from high-cost payday loans and encourage the development of affordable payday loan alternatives. The Fed chairman responded that he believes competition is the best solution, but then gave the nod to credit unions: “And I think banks and credit unions--I give particular credit to credit unions. They have done some particularly good work in terms of providing remittance services to allow people to get money back to their families without exorbitant costs.” Bernanke added that he would encourage all financial institutions to continue outreach efforts to underserved communities. He said he also supports financial education efforts. The senator from Hawaii also noted credit union efforts to provide alternatives to payday loans. Akaka said that as a result of a National Credit Union Administration grant, Community FCU, Kailua, has developed an affordable alternative to payday loans, which he said are popular with members of the U.S. Marines and other members.

Inside Washington (07/15/2008)

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* WASHINGTON (7/16/08)—Federal Reserve Chairman Ben Bernanke, testifying before the Senate Banking Committee Tuesday, said the country’s current economic situation poses “significant challenges” for Fed policymakers attempting to keep the economy growing, while avoiding a dangerous inflation flare up. The Fed chief warned that rising energy and food prices are increasing inflation risks at a time when officials try to cope with persistent strains in financial markets, loss of jobs and problems in the housing industry. Bernanke was later joined before the banking panel by U.S. Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Chris Cox. They were summoned to detail a rescue plan announced over the weekend intended to bolster Fannie Mae and Freddie Mac. The Bush administration plan asks Congress to temporarily increase lines of credit to Fannie and Freddie. It also would allow the government to buy their stock. (Associated Press July 15)… * WASHINGTON (7/16/08)--A premium increase could hit the Federal Deposit Insurance Corp. (FDIC) in September if the IndyMac failure lowers the Deposit Insurance Fund’s reserve ratio to 1.01% as expected (American Banker July 15). FDIC will be required to rebuild the fund if it drops below $1.15 per each $100 of insured deposits. The premiums could cost the FDIC up to 15 cents per $100 of domestic deposits, said Jaret Seiberg, Stanford Group Co. analyst. The failure could cost the Deposit Insurance Fund $4 billion to $8 billion. The IndyMac failure is the second largest in history, asset-wise ... * WASHINGTON (7/16/08)--The Federal Deposit Insurance Corp. (FDIC) announced Monday that it will stall foreclosures on $15 billion of loans on IndyMac’s books, FDIC Chairman Sheila Bair said (American Banker July 15). Bair said she’d like to look at the loans to see if they can be modified. The loans are worth 7.5% of the thrift’s servicing portfolio ... * WASHINGTON (7/16/08)--Legislators are pushing to create a new regulator for Fannie Mae and Freddie Mac after the Treasury Department moved to backstop the enterprises late last week. The House is expected to vote on the bill this week and it could be approved next week (American Banker July 15). Though Republicans have earned enough votes in the Senate to block the measure, House Financial Services Committee Chairman Barney Frank (D-Mass.) is viewed as having more leverage in passing the legislation because the Treasury added changes to the bill and problems surrounding Fannie and Freddie continue to grow. The House is expected to accept the Treasury’s changes and allow the Federal Reserve Board to take on a regulatory role for the enterprises. Frank said he wants to stall the enactment date for a new regulator and instead raise the enterprises’ conforming loan limits. Sen. Richard Shelby (R-Ala.), the ranking Republican on the committee, opposes both moves ... * WASHINGTON (7/16/08)--The federal banking and thrift agencies today issued final guidance outlining the supervisory review process for banking organizations implementing Basel II. The final guidance aims to help banking organizations meet certain qualification requirements in the advanced approaches rule, which took effect April 1 ... * WASHINGTON (7/16/08)--National Credit Union Administration (NCUA) Vice Chairman Rodney Hood announced Tuesday that registration for his 2008 Risk Mitigation Summit in Chicago Aug. 7 is full. Registrants may be placed on a wait list ... * WASHINGTON (7/16/08)--The Federal Reserve Board approved amendments to Appendix A of Regulation CC, which reflects the restructuring of the Federal Reserve’s check processing operations in the First and Third Districts. Appendix A provides a routing number guide that helps depository institutions determine the maximum permissible hold periods for most deposited checks. As of Sept. 20, the Windsor Locks office of the Federal Reserve Bank of Boston no longer will process checks, and banks served by the office will be reassigned to the Federal Reserve Bank of Philadelphia ...

Insiders Look keeps CUs in view of Hill

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WASHINGTON (7/16/08)--The Credit Union National Association (CUNA) continued to keep credit unions in the focus of Capitol Hill Wednesday with its eighth "Power Breakfast," this called “An Insider’s Look at the Battle for Congress.” Organized by National Journal and MSNBC, co-sponsored by CUNA and other enterprises, the power breakfast series has typically attracted close to 100 Capitol Hill staffers, lobbyists and reporters. This session had an RSVP figure of 180 attendees. Today’s program spotlight the upcoming November elections and how both Democrats and Republicans will be striving for the majority in Congress amidst tight margins. Scheduled participants include:
* Glen Bolger, partner and co-founder, Public Opinion Strategies, described as a national Republican political and public affairs research firm; and * John Lapp, partner, McMahon Squier Lapp & Assoc., a Democratic media consultancy firm.
The session will be moderated by Amy Walter, editor-in-chief of “The Hotline,” with Charlie Cook, publisher of The Cook Political Report, and political analyst for National Journal Group. According to CUNA Political Director Trey Hawkins, by participating in the power breakfast series, CUNA assures that "insiders from Capitol Hill and in the Washington lobbying community are seeing credit unions in the thick of the political process."

Third-quarter boost belies a recession Hampel in iPoliticoi

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WASHINGTON (7/16/08)—The economy may see a slight uptick soon as a result of the recent delivery of 112 million federal stimulus checks, but that relief just belies the year’s recession, according to Bill Hampel, Credit Union National Association (CUNA) chief economist. “The third quarter will look good because of the tax rebate checks,” said Hampel, in a recent article in Politico. The article broadly focused on a point that the country’s next president will “inherit an economy on the brink of a full-blown recession.” In his comments, Hampel added that, “As soon as that money is spent, the economy will slip back to just above or in a recession.” Economists generally argued in the piece that even if the housing and financial markets start to regain stability by the end of the year, low spending rates for consumers would erase any chance of a recovery by then. “Consumers face a perfect economic storm: Consumer confidence is its lowest level in about 30 years. Most Americans have lost value in their homes and stocks. And they find it harder to get new lines of credit and have little savings and high debt,” wrote reporter Lisa Lerer. Others who contributed views to the article included: Jason Furman, economic advisor to Barack Obama, the U.S. Senator from Illinois and presumptive Democratic nominee for the 2008 presidential election; and former Sen. Phil Gramm (R-Texas), considered a top economic advisor to Sen. John McCain (R-Ariz.), Obama’s Republican counterpart in the presidential race.

Senate approves sends housing bill back to House

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WASHINGTON (7/15/08)—House Financial Services Committee Chairman Barney Frank (D-Mass.) Monday reiterated his intention to have a package of housing reforms ready soon for the president’s signature. Frank described what the bill will look like. The chairman issued his statement after the Senate voted 63-5 Friday in favor of a bill to respond to the subprime mortgage crisis. The Senate sent the legislative package back to the House of Representatives for further modifications. The House passed a similar bill earlier this year, and now the two bodies must reconcile differences to work out a bill that they hope will be signed into law by President George W. Bush later this week. In a statement, Frank noted that the current “turmoil” in the American mortgage markets is at the root of a financial crisis that has “undermined confidence in and threatens the stability of the global financial system.” He said Congress will soon send the president a comprehensive package of legislation that “makes future crises less likely” by:
* Responding to the current situation; * Strengthening regulatory oversight and prohibiting the irresponsible lending practices that brought us here; and * Addressing the lack of affordable housing in America.
“First, the legislation we will pass creates a new regulator for the (government-sponsored enterprises) GSEs with strong additional powers. We also make it possible for the FHA to assist homeowners facing foreclosure by refinancing them into sustainable loans. The bill will also strengthen the FHA’s capacity to resume its historical role as a lender of first resort for working families and first time homebuyers.” Frank also pledged that the bill would have proposals announced over the weekend by U.S. Treasury Secretary Henry Paulson to ensure that Fannie Mae and Freddie Mac have the resources needed to continue to play their role in America’s housing finance system. “Third, in a long overdue measure, the legislation creates an affordable housing trust fund that allows us to address decades of under investment in the supply of housing for lower income families,” Frank said. The bill approved Friday by the Senate would set up a new program to allow the FHA to refinance $300 billion worth of distressed subprime home mortgages and place them into 30-year fixed-rate FHA-backed mortgages. It is expected to provide aid for approximately half a million borrowers struggling to hang onto their homes. The program would allow certain mortgage holders to get an FHA guarantee on a loan if they write down the principal amount. The bill also adds housing tax breaks. For instance:
* Taxpayers who do not itemize deductions can deduct some property taxes; * First-time homebuyers would be offered refundable tax credits’ $11 billion of private activity bonds are authorized to refinance and rehabilitate subprime homes; and * $3.92 billion is provided in Community Development Building Grant (CDBG) funds to mitigate the effects of the mortgage and credit crises.

Fed fair-lending plan changes key definition

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WASHINGTON (7/15/08)—The Federal Reserve Board Monday approved a final rule for home mortgage lending practices. The rule is intended to better protect consumers and facilitate responsible lending, while keeping credit available to qualified borrowers. The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices. It establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in a transaction. By amending its Regulation Z, which implements Truth-in-Lending provisions adopted under the Home Ownership and Equity Protection Act (HOEPA), the Fed adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling. A Fed announcement said the plan largely follows a proposal released by the board in December 2007, with enhancements that address ensuing public comments, consumer testing, and further analysis. Jeffrey Bloch, senior assistant general counsel for the Credit Union National Association (CUNA), said, however, that there have been changes to the original plan. One change of note involves the agency’s threshold for determining what is a “higher-priced” mortgage loan. The Fed will be using a threshold based on mortgage loans, instead of based on U.S. Treasury securities. More specifically, the threshold will be based on an "average prime offer rate" that is published by Freddie Mac. “As mentioned in our comment letter in response to this proposal, we were concerned that the proposed threshold based on Treasury securities may have covered some portion of the prime loan market, which is not what the Fed intended,” Bloch said Monday. He added, “We were also concerned that using Treasury securities, especially when they are volatile, may result in situations in which a loan may or may not be covered, depending on the Treasury rates at the time the loan is made. “In the final rule, the Fed recognized these concerns, and we believe that the change in the thresholds should alleviate these concerns.” The four protections adopted for the newly defined category of higher-priced mortgage loans will:
* Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice;” * Require creditors to verify the income and assets they rely upon to determine repayment ability; * Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed; and * Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
The Fed will also be issuing a separate proposal to revise the definition of "higher-priced mortgage loan" under Regulation C, the Home Mortgage Disclosure Act (HMDA) so it is consistent with the definition in this rule. Under HMDA, lenders are required to report additional price information for these types of loans. Credit unions and others will have an opportunity to comment further on this change and CUNA will issue a Comment Call on this shortly. In a related story, House Financial Services Chairman Barney Frank (D-Mass.) issued a statement indicating he did not believe the Fed rules alone were adequate to address predatory and deceptive lending practices. Frank said, “Those new rules combined with H.R. 3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007, which the House passed last year—and that Senator (Christopher) Dodd (D-Conn.) assures me the Senate will address this year--will make the problem of irresponsible lending far less likely in the future.”

NCUSIF protection strong at mid-year says NCUA

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ALEXANDRIA, Va. (7/15/08)–National Credit Union Administration (NCUA) Chairman JoAnn Johnson issued a state-of-the-National Credit Union Share Insurance Fund (NCUSIF) assessment Monday based on mid-year data and said the fund stands strong with an equity ratio estimated at 1.24% for June 30. Johnson reminded that member deposits in federal and almost all state-chartered credit unions are federally insured by the NCUSIF, which in turn is backed by the full faith and credit of the United States government. “Consumers who have federally insured funds in credit unions should rest assured that their deposits are safe up to at least $100,000 per account, with additional coverage of up to $250,000 for certain retirement accounts,” Johnson said. She added that the fund’s equity ratio is expected to increase to 1.28% by yearend. NCUA staff is scheduled to present mid-year NCUSIF results in more detail at the July 24 NCUA board meeting. “While there are isolated instances of credit unions encountering difficulties, on the whole the credit union industry is healthy,” Johnson assured. “The NCUSIF enters the second half of 2008 secure and well-capitalized.”

FTC plans a ID theft victim survey

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WASHINGTON (7/15/08)—The Federal Trade Commission has announced its intention to conduct a survey of identity theft victims regarding remedies available to them under the Fair and Accurate Credit Transactions Act (FACTA). The survey participants will be selected from identity theft victims who contacted the FTC between Jan.1 and May 30 this year, according to the agency’s Federal Register document. Information gathered from the survey is expected to allow the FTC to focus its approach regarding consumer education and law enforcement. The FTC also recently issued a reminder that an interagency identity theft “red flags” rule requires credit unions and other financial institutions and creditors to develop and adopt written identity theft prevention programs by Nov. 1. The red flags rule was issued last November by the FTC, the National Credit Union Administration, and federal bank and thrift regulators. The rule requires each financial institution and creditor that holds any consumer account--or other account for which there is a reasonably foreseeable risk of identity theft--to develop and implement an Identity Theft Prevention Program for combating identity theft in connection with new and existing accounts. The program must include reasonable policies and procedures for detecting, preventing, and mitigating identity theft and enable a financial institution or creditor to:
* Identify relevant patterns, practices, and specific forms of activity that are "red flags" signaling possible identity theft and incorporate those red flags into the program; * Detect red flags that have been incorporated into the program; * Respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and *Ensure the Program is updated periodically to reflect changes in risks from identity theft.
The agencies also issued guidelines to assist financial institutions and creditors in developing and implementing a program, including a supplement that provides examples of red flags. Use the resource links below for more on the FTC survey and on the identify theft rule.

Inside Washington (07/14/2008)

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* WASHINGTON (7/15/08)--The Federal Reserve Board and Bush administration announced Sunday that the Federal Reserve Bank of New York has the authority to lend to Fannie Mae and Freddie Mac. “This authorization is intended to supplement the Treasury's existing lending authority and to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in financial markets,” the Fed said in a release. Any lending would be at the primary credit rate. The Treasury also proposed a three-part plan: a temporary increase in the line of credit the government sponsored enterprises (GSEs) have with Treasury, temporary authority for the Treasury to purchase equity in either of the two GSEs if needed and a consultant role for the Federal Reserve in the new GSE regulator's process for setting capital requirements, Treasury Secretary Henry Paulson said. Government agencies are stepping up to help the GSEs as Fannie and Freddie shares dropped about 35% last week (American Banker July 14) ...

Noting closing Mica says CUs can help consumers

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WASHINGTON (7/14/08)—News late Friday that the Office of Thrift Supervision closed IndyMac Bank, F.S.B., Pasadena, Calif., underscores the need for the U.S. Congress to explore ways to increase credit availability for consumers, said Credit Union National Association President/CEO Dan Mica. Mica said that as the economy experiences a credit crunch in many sectors, credit unions stand "ready, willing and able to help alleviate the problem and promote economic growth." He said that willingness could be enhanced to the benefit of the consumer by two legislative proposals currently pending congressional action. He urged Congress to support provisions contained in the Credit Union Regulatory Improvements Act (H.R. 1537, S. 2967) that would improve a current 12.25%-of-assets cap on member business lending (MBL) by raising it to 20% of assets. He also urged lawmakers to exempt from the cap MBLs made in underserved areas. Mica also noted the value of prompt corrective action reform, changing the current system to one that more accurately reflects risk. Such a change, Mica said, could free up more funds that could be turned into loans for credit union members. In its announcement the OTS named Federal Deposit Insurance Corporation (FDIC) conservator of the closed institution. The FDIC will transfer insured deposits and substantially all the assets of IndyMac Bank, F.S.B., Pasadena, CA, to IndyMac Federal Bank, FSB. The OTS statement said: Brokered deposits will be held by the FDIC and those insured deposits will be paid off when the insurance determination is complete. IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008. As conservator, the FDIC will operate IndyMac Federal Bank, FSB to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by IndyMac Bank, F.S.B. Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. On-line and phone banking services this will be operational on Monday. Loan customers should continue making loan payments as usual. Starting today, IndyMac Federal Bank, FSB's 33 branches will observe normal operating hours and will continue to offer full banking services, including on-line banking. For additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919.

MSB vote back on House calendar

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WASHINGTON (7/14/08)—A delayed vote a House bill intended to encourage credit unions and banks to serve money services businesses (MSBs) appears to be over. The Money Services Business Act (H.R. 4049) is back on the House suspension calendar this week. Posted on Tuesday’s House agenda, the MSB is listed as the first of 16 items the House intends to decide that day. Although a vote was expected last week, the bill was removed mid-week from the voting schedule. The bill was introduced in 2007 by Rep. Carolyn Maloney (D-N.Y.), chairman of the House Financial Services subcommittee on financial institutions. Other members of the House Financial Services Committee to back the bill include its chairman, Rep. Barney Frank (D-Mass.), and ranking member Spencer Bachus of Alabama. The bill seeks to clarify that financial institutions serving MSBs would not be responsible for whether the MSB is complying with anti-money laundering laws and any other applicable Bank Secrecy Act (BSA) requirements. In 2006, the Financial Crimes Enforcement Network (FinCEN) began seeking public comment regarding the impact of BSA regulations on the ability of money services businesses (MSBs) to open and maintain accounts and obtain other banking services at depository institutions.

Dodd introduces his credit card curbs

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WASHINGTON (7/14/08)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.) last week introduced a bill intended to curb such credit card practices as “universal default,” “any time, any reason'' repricing, multiple over-limit fees, and youth marketing. Dodd floated a draft of his legislation in April but said at the time that he would wait until regulators and the industry had a chance to curb perceived abuses. Dodd decided to go ahead with his legislation at this time because he believes both the government and private industry have failed to address the issues he has said negatively impact consumers, according to John Hildreth, senior legislative representative for the Credit Union National Association (CUNA). Among the bill’s provisions are prohibitions against:
* Interest charged for debt paid on time; * Interest charges on any portion of credit card debt which the credit card holder paid on time during the grace period’ * Credit card issuers from increasing interest rates on cardholders who are in good standing for reasons unrelated to the cardholder's behavior with respect to that card, a practice referred to as “universal default;” * Charging interest on credit card transaction fees, such as late fees and over-the-limit fees; and * Charging of repeated over-the-limit fees for a single instance of exceeding a credit card limit.
The bill also orders a government study of interchange fees, the fees charged merchants by credit card companies each time a consumer uses a card for a purchase. The House is expected to vote this week on legislation that would give merchants an antitrust exemption to negotiate interchange fees. (See relat4ed story, “Interchange bill markup expected Wednesday.”) On the House side, Rep. Carolyn Maloney (D-N.Y.), who chairs the House Financial Services subcommittee on financial institutions, introduced a package of credit card reforms in February called the Credit Cardholder's Bill of Rights (H.R. 5244). The bill was introduced with 40 co-sponsors and also is intended to curb abusive credit card practices, such as some interest-rate increases and late fees. CUNA applauds congressional and regulatory action to end discriminatory, predatory, deceptive, and abusive lending practices. However, it has several reservations regarding certain proposals aimed at achieving these ends. For instance, CUNA is concerned that a prohibition against universal default practices would prevent card issuers from adjusting a card holder’s interest rate based on their total credit risk. CUNA has noted that credit unions must often examine a card holder’s credit report, to approve a credit line increase for example. Negative information on a credit report would lower that credit score and thus a card issuer would have to consider that in its ongoing relationship with the card holder. On May 2, a joint proposal from the National Credit Union Administration, the Federal Reserve Board, and the Office of Thrift Supervision was released regarding overdraft protection plans and practices relating to credit cards. The plan also included possible amendments to Regulation Z (Truth in Lending) and Regulation DD (Truth in Savings) to complement the unfair acts and deceptive practices proposals. For credit cards, the proposal addressed time periods for making payments, payment allocations, interest rate increases on outstanding balances, fees resulting from credit holds, methods for computing balances subject to interest charges, excessive security deposits and fees charged when credit is issued, and advertisement that include multiple interest rates and multiple credit limits. For more on credit card proposals and CUNA’s position, use the resource link below.

Interchange bill markup expected Wednesday

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WASHINGTON (7/14/08)--The House Judiciary Committee is expected to vote Wednesday on bill that would set up a government tribunal as mediator in disputes that could occur relating to interchange fees based on consumer use of credit and debit cards. The committee will likely take up a bill known as the Credit Card Fair Fee Act (H.R. 5546), according to the Electronic Payments Coalition (EPC), of which the Credit Union National Association (CUNA) is a member. The legislation would give merchants an antitrust exemption to negotiate interchange fees. At issue are the fees charged merchants by credit card companies each time a consumer uses a card for a purchase. H.R. 5546 has a companion bill (S. 3086) of the same name pending action in the Senate. Additionally, Rep. Peter Welch (D-Vt.) has introduced a bill to require credit card companies to disclose their interchange rates, terms, and conditions to consumers and businesses. CUNA, all members of the EPC and the U.S. Department of Justice are among opponents of the “fair fee” legislation. CUNA opposes legislation that would regulate interchange because it believes that such action would adversely affect consumer options, competition and technology innovation. Credit unions use interchange fee revenue to offer credit and debit cards to their members. The revenue covers the costs and risks the credit union incurs in the card system, including consumer nonpayment and fraud. The Justice Department, commenting on the plan, wrote earlier this month, “The antitrust laws are the chief legal protector of the free-market principles on which the American economy is based. Companies free from competitive pressures have incentives to raise prices, reduce output, and limit investments in expansion and innovation to the detriment of the American consumer." The letter also warned that the bill seeks to counter "perceived market power on the part of large credit card networks" by shifting power to merchants negotiating with those networks. In a related story, a bill introduced last week by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to address abusive credit card practices includes a provision that would require a government study of interchange fees. (See “Dodd introduces his credit card curbs“)

Inside Washington (07/11/2008)

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* WASHINGTON (7/14/08)--At a hearing Thursday, House Financial Services Committee Chairman Barney Frank (D-Mass.) said expanding the Federal Reserve Board’s powers would be at the top of his priority list next year. He also noted that he wants to give the Treasury more oversight (American Banker July 11). This contrasts to his announcement last year that he wanted to remove some of the Fed’s power because of a poor consumer protection record. If Frank moves ahead with the expansion, it would be the largest broadening of the Fed’s authority in several decades ... * WASHINGTON (7/14/08)--President Bush has nominated Anthony Ryan, assistant secretary of financial markets for the Treasury, to succeed Robert Steel as Treasury undersecretary (American Banker July 11). Steel accepted a position at Wachovia Corp. Wednesday ...

In iRoll Calli Mica warns of bad lenders comeuppance

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WASHINGTON (7/14/08)—For mortgage lenders who acted improperly, or even in the gray areas of good lending practices, there may be a “comeuppance” in Congress next year, Credit Union National Association (CUNA) President/CEO Dan Mica said recently in the Capitol Hill publication Roll Call. A July 10 article, “Financial Crisis Keeps K Street Busy,” noted that Congress has made easing the foreclosure turmoil a legislative priority this year and predicted that the crisis will continue to dominate the federal legislative agenda in 2009. Mica’s statements concurred: “There will be continuing massive Congressional involvement in the financial services industry, and they will be looking at cures and prevention of what caused this subprime crisis, and I believe they may be placing some blame.” “There will be very direct and riveted action in the financial services community next year,” Mica added. “For those financial services who acted in the gray areas or improperly, there may be a comeuppance.” The article, which included comments from a range of lobbyists--representing consumers, banks, insurance interest and more--noted that legislative changes could come in the form of increased consumer protections and “sweeping” new regulatory proposals for banks, investment houses, insurers and other financial services firms.

CUNA urges Paulsons support for PCA reform

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WASHINGTON (7/14/08)—The Credit Union National Association (CUNA) thanked U.S. Treasury Secretary Henry Paulson for his remarks recognizing credit unions during congressional testimony last Thursday, and used the occasion to urge him to support risked-based prompt corrective action (PCA) reform for credit unions. Testifying before the House Financial Services Committee on changes to the country financial regulatory structure, Paulson said he “appreciates what credit unions do” and does not want to “impact credit unions.” CUNA President/CEO Dan Mica told Paulson that credit unions “welcome your recognition.” He added that CUNA respectfully requests “that consistent with your comments the Treasury support PCA revisions for credit unions.” “Given the implementation of Basel II and the fact that a new proposal from the Federal Deposit Insurance Corporation and the Federal Reserve Board is pending that would allow all except the largest banks to take advantage of Basel II-type standards modified to fit their risk profiles, it is timely and appropriate to consider risk-based PCA reform for credit unions,” Mica urged. He noted that also within the context of last week’s committee’s hearing on financial restructuring, CUNA has written to its chairman, Rep. Barney Frank (D-Mass.), and ranking member Rep. Spencer Bachus (R-Ala.). CUNA urged their support for revisions to the Federal Credit Union Act that would replace the current inflexible statutory net worth standards for credit unions with a risk-based system that will more accurately reflect a credit union’s portfolio risk. (See News Now, July 11, “CUNA urges House panel to focus on CU risk system.”)

Hyland touts four Cs of good lending

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ALEXANDRIA, Va. (7/14/08)—Credit unions have an opportunity to be a trusted lender to members in these times of economic uncertainty, said National Credit Union Administration (NCUA) board member Gigi Hyland last week, but they need to adhere to principles of good lending. Hyland noted in a release that she represented her agency at the Federal Deposit Insurance Corporation (FDIC) forum on strategies for promoting responsible, sustainable mortgage lending for low- and moderate-income (LMI) families. That forum was held in Arlington, Va. on July 8. "Getting back to basics in mortgage lending by adhering to solid underwriting standards and following the four ‘Cs’ of good lending -- commitment, credit, collateral and capital -- were key themes of the day,” Hyland said. She encouraged credit unions stick to “time-tested” lending principles. Hyland noted Mortgage Bankers Association predictions that mortgage originations may decline by 18% in 2008 and by 11% in 2009. Use the resource link below to access a webcast of the forum and a follow-up meeting addressing strategies to encourage mortgage lending.

Help from CUNA on credit card overdraft restrictions

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WASHINGTON (7/14/08)—National Credit Union Administration (NCUA) officials will be on hand to offer guidance in July as the Credit Union National Association (CUNA) provides information for credit unions on proposed restrictions for credit cards and overdraft plans. CUNA has organized a July 28 audio conference on the emerging issues surrounding the planned restrictions. The hour-and-a-half session will be conducted from 2-3:30 p.m. ET. The range of topics will include:
* The joint plan issued by the NCUA, Federal Reserve Board, and the Office of Thrift Supervision that will prohibit a number of credit card practices and will impose restrictions on overdraft protection plans; * Details of the credit card proposals, such as: time periods for making payments, payment allocations, interest rate increases on outstanding balances, fees resulting from credit holds, methods for computing balances that are subject to interest charges, excessive security deposits and fees that are charged when credit is issued, and advertisements that include multiple interest rates and multiple credit limits; * Details on the overdraft protection plan restrictions, such as: requirements that consumers be provided an opportunity to “opt-out” of the plan, address fees resulting from holds on debit card transactions, and receive disclosure requirements in periodic statements; and * Two separate but related Fed proposals to amend Regulation Z, the Truth in Lending Act, Regulation DD, and the Truth in Savings Act.
Scheduled audio conference speakers include the following:
* Tonya Green, NCUA staff attorney in the Operations Division of the Office of General Counsel. Her responsibilities include providing interpretations of the Federal Credit Union Act and NCUA Rules and Regulations to the agency and outside parties; advising the Board and NCUA staff on general legal matters; and drafting regulations designed to ensure the safety and soundness of credit unions; * Ross Kendall, a member of the NCUA’s office of general counsel, who has more than twenty-five years of experience in the law of financial institutions, including both private practice and as a regulator; * Matt Biliouris, who as program officer in the NCUA Office of Examination & Insurance addresses various issues involving the agency’s examination program, with a specialized focus on BSA, lending, and consumer compliance; * Mike Long, vice president of lending at the University of Wisconsin CU, chairman of the CUNA Lending Council Regulation and Legislation Committee, and member of the CUNA Consumer Protection Subcommittee; * Mary Dunn, CUNA senior vice president of regulatory advocacy and deputy general counsel. Dunn regularly represents credit union interests before the NCUA, the Federal Reserve Board, and other federal agencies; and * A Federal Reserve representative.
For more details and to register, use the resource link below.

Inside Washington (07/10/2008)

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* WASHINGTON (7/11/08)--Panelists from a recent Securities and Exchange Commission roundtable signaled their support for the Financial Accounting Standards Board fair-value accounting model (American Banker July 10). The first panel comprised representatives from large financial companies, while the second focused on smaller ones. John B. Wojcik, chief financial officer, Bank of the West, who sat on the second panel, spoke favorably of the model but said the market values don’t reflect the cash flow values on some debt flow instruments. The Credit Union National Association has stated that the model could be costly and confusing for credit unions. The World Council of Credit Unions has said that the standard could be detrimental in credit union mergers ... * WASHINGTON (7/11/08)--Federal Reserve Board Chairman Ben Bernanke presented the Semiannual Monetary Report before the Senate Banking Committee Tuesday and will undergo questioning before the House Financial Services Committee Wednesday on the state of the economy (American Banker July 10) ...

Next monetary policy hearings not likely to be routine

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WASHINGTON (7/11/08)—Federal Reserve Board Chairman Ben Bernanke is slated to present his semi-annual economic forecast before Congress twice next week. Bernanke will appear before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. Although the public airing of the chairman’s assessment of monetary policy are routine and required under the Humphrey-Hawkins Act, the hearings next week may prove to be unusual. Lawmakers in both the House and Senate may decide to probe the Fed chief on a number of hot issues. For instance, the Fed’s rules on fair lending practices under the Home Ownership and Equity Protection Act are expected to come out Monday. Also, Bernanke may be quizzed further on comments made this week before Congress that the Fed should be given stronger supervisory authority over investment banks to help protect the broader economy from problems like ones that caused an emergency rescue of investment bank Bear Stearns.

Paulson announces Treasury staff shifts

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WASHINGTON (7/11/08)—Following an announcement by Wachovia Corp. late Wednesday that U.S. Treasury Undersecretary Robert K. Steel will become its chief executive and president, Treasury Secretary Henry M. Paulson, Jr. announced staff changes in his agency’s office of domestic finance. The Treasury announcement noted:
* Assistant Secretary for Financial Markets Anthony W. Ryan will take on a broader role managing Treasury's domestic finance and financial markets agenda; * Assistant Secretary for Financial Institutions David Nason will continue to spearhead regulatory reform efforts and oversee financial institutions policy, including issues surrounding the government-sponsored enterprises; * Steven Shafran, with 22 years of experience in finance before coming to Treasury, will take on a broader role in his current capacity as senior adviser to the Secretary; * Assistant Secretary Kenneth Carfine will continue to oversee the government's fiscal operations, including managing federal financing needs and the government's cash flow; and * Deputy Assistant Secretary for Financial Institutions Policy Jeremiah Norton will take on additional financial institutions responsibilities.
Paulson said, “I have great confidence in the abilities of the domestic finance team at Treasury to adjust to this change and not miss a beat." He also noted that Steel has been his friend and colleague for more than 30 years and had served “the President and the public with ingenuity and dedication during extraordinary times in our financial markets.”

Mica in iPoliticoi Bankers should learn from CUBTRRA

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WASHINGTON (7/11/08)—A current seeming détente between credit union and bank lobbying forces—declared to improve chances for regulatory relief for all financial institutions this year—is likely to be short lived. However, Credit Union National Association (CUNA) President/CEO Dan Mica told Politico that the bankers have much to learn from it. In a July 10 article, Mica noted that banks have been trying for years to get certain regulatory relief provisions passed by the U.S. Congress. But, he noted, they “couldn’t get it done this time without working with credit unions on the broader legislation.” Politico is a prominent publication widely read on Capitol Hill and by Washington's political establishment. The article referred to the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA) and said the “modest yet carefully crafted package of regulatory tweaks” has the rival credit union and banking lobbies “working toward the common goal of Senate floor consideration before the legislative calendar runs down.” The House has passed the bill and under normal circumstances the Senate Banking Committee would hold a hearing, and then conduct a vote, before passing the package along for consideration on the Senate floor. “The bill’s passage (in the House) demonstrated the recognition that credit unions needed to be treated fairly and with parity,” said Mica, who hopes it will be followed by “serious and active consideration” of credit unions’ capital reserve and business lending needs. “The bankers have started to realize that it’s not just a one-shot playing field for them,” he said. “We’re going to have to work together or nothing is going to happen.” The article went on to say that both credit union representatives and bankers think the bill’s industry-wide support, along with the strongly favorable vote in the House—will put CUBTRRA on the short track directly to a Senate floor vote. “If ever there was an opportunity to try to fast-track something, this is it,” Mica said in the piece entitled, “Credit unions, banks join forces for now.” “We’re going to do our best. The enemy for us is time,” Mica noted, referring to the abbreviated Senate calendar. The Senate announced this week that it will adjourn for the year on Sept. 26 because of the upcoming federal elections. Use the resource link below to read more.

CUNA urges House panel to focus on CU risk system

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WASHINGTON (7/11/08)--As the House Financial Services Committee proceeded with hearings on the implications of current financial markets policies, the Credit Union National Association (CUNA) urged the committee’s leadership to also consider whether a risk-based capital system is appropriate for credit unions. In a letter to the committee’s chairman, Rep. Barney Frank (D-Mass.), and its ranking member, Rep. Spencer Bachus (R-Ala.), CUNA President/CEO Dan Mica noted that the committee would be focusing on a risk-based capital system for investment banks during its hearings. Mica pointed out that credit unions are seeking a risk-based system for themselves, and recommended that now is an appropriate time to include credit unions in the mix of consideration. “The National Credit Union Administration (NCUA) has developed a risk-based capital system for credit unions,” Mica wrote. “Legislative language supported by NCUA is incorporated in Title I of H.R. 1537. The NCUA’s proposal would lower the leverage requirement for credit unions while at the same time imposing a new, risk-based capital requirement to augment the leverage ratio.” H.R. 1537 is the Credit Union Regulatory Improvements Act (CURIA), with 150 backers in the House including its authors Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.). It is known as S. 2957 in the Senate, where it was introduced by Sen. Joseph Lieberman (I-Ct.) and has three additional co-sponsors. “Unlike other depository institutions, credit unions lack access to capital markets. Without such access, in times of rapid savings growth (such as when members are concerned about the economy or financial markets) the ratio of net worth to assets can fall substantially even for healthy, well-managed credit unions.” Mica wrote. The CUNA leader added, “What should really matter is how those new assets are deployed, rather than just their sheer volume.” The CUNA letters hit the lawmaker’s desks just as the financial services panel opened what it has said will be a series of hearings on domestic and international financial markets. The committee has said it is investigating the adequacy of current oversight and regulatory tools, and the extent to which existing structures are adequate to respond to future problems. Federal Reserve Board Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson testified Thursday. Use the resource link below to read the complete CUNA letter to lawmakers.

Three blocked from CU work

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ALEXANDRIA, Va. (7/10/08)—Three former credit union employees are barred from participating in the affairs of any federally insured financial institution under the most recent enforcement order issued by the National Credit Union Administration (NCUA). The NCUA has blocked a former credit union teller from Washington, a former credit union loan officer from Tennessee, and a former credit union loan officer from Indiana from future work at those institutions. According to an agency announcement posted on its Web site late Tuesday:
* Anita Hubert, a former loan manager at Community Choice FCU, Indianapolis, Ind., consented to a prohibition order, without admitting or denying fault, to avoid the time and cost of litigation; * Anne M. Massey, a former teller at Simpson Community CU, Shelton, Wash., was found guilty of theft and sentenced to serve 18 months in prison and ordered to pay $3,970 in restitution; and * Patricia A. Russell, a former loan officer and Visa coordinator for First Kingsport CU, Kingsport, Tenn., consented to a prohibition order, without admitting or denying fault, to avoid the time and cost of litigation.
Violation of an NCUA prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link below to view NCUA enforcement orders.

Key compliance deadlines outlined

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WASHINGTON (7/10/08)—Two key deadlines are approaching quickly and compliance expert Valerie Moss says credit unions must gear up now for new rules on affiliate marketing and identity theft red flags. Moss, director of compliance information for the Credit Union National Association (CUNA), notes in a July article in Credit Union Magazine that Oct. 1 is the drop-dead date for affiliate marketing rules and Nov. 1 for ID theft red flags. On affiliate marketing, Moss explains that, with a few exceptions, if a credit union shares certain consumer information—called eligibility information—with an affiliate that affiliate cannot use the information for marketing solicitations unless certain conditions are met. Moss lays out those conditions and more in her article. Regarding ID red flags, Moss poses the seven questions credit unions should be asking during the few months left before the mandatory compliance date. As a little bonus in the article a credit union, Moss shares with readers a preliminary look at a brand new risk-based pricing proposal and previewed final “furnisher” regulations. The furnisher rules will require credit unions to have policies and procedures in place ensuring the accuracy and integrity of consumer information. And the proposal on risk-based pricing requires additional disclosures to consumers when less favorable credit terms are offered. Use the resource link below to glean more compliance gems in “FACT Checkup.”

Inside Washington (07/09/2008)

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* WASHINGTON (7/10/08)--Sen. Barack Obama (D-Ill.), presidential hopeful, said Tuesday he would broaden a bankruptcy plan to include a “fast-track” process to help military families and help older Americans or those impacted by natural disasters (American Banker July 9). The senator also criticized Sen. John McCain (R-Ariz.), his opponent in the presidential race, for siding with “big banks” and not believing that the government should protect Americans from poor lending practices. He also noted McCain’s support for a 2005 bankruptcy law that made it more difficult for consumers to discharge their debt by supporting lenders. A McCain spokesperson said 18 Democrats also supported the bill ... * WASHINGTON (7/10/08)--The Securities and Exchange Commission (SEC) Tuesday released findings from 10-month examinations of three major credit rating agencies. The exams found that the agencies struggled with the increase in the number and complexity of subprime residential mortgage-backed securities and collateralized debt obligations deals since 2002. None of the agencies had specific written comprehensive procedures for rating the securities or deals. Aspects of the rating process were not disclosed or even documented, and conflicts of interest were mismanaged, according to the SEC report ... * WASHINGTON (7/10/08)--The Federal Housing Administration (FHA) should stand on its own, FHA Commissioner Brian Montgomery said last week during a forum on mortgage lending. The FHA needs to recruit and retain professional staff, he added. If the agency were independent, it could focus on its own mission and have the tools and staff it needs to serve that role, he said (American Banker July 9) ... * WASHINGTON (7/10/08)--Treasury Secretary Henry Paulson supports using covered bonds by U.S. financial institutions as alternate liquidity sources. The bonds could decrease expenses for first-time home buyers and help existing ones refinance, he said. The Federal Deposit Insurance Corp. recently adopted a rule that would increase investors’ access to the bonds as collateral in case of a bank failure (American Banker July 9). The bonds are more popular in Europe than in the U.S. ...

Inside Washington (07/08/2008)

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* WASHINGTON (7/9/08)--The Federal Housing Administration (FHA)’s risk-based pricing structure goes into effect next week. Under the structure, borrowers without traditional data will pay lower insurance fees than those with credit scores lower than 560. However, they will pay more than borrowers with scores of 600 or higher (American Banker July 8). The FHA has underwritten about 5% of its mortgages with nontraditional data, said Lemar Wooley, FHA spokesman. The agency said in April that nontraditional credit data should still be verified by credit bureaus ... * WASHINGTON (7/9/08)--It’s important that borrowers aren’t being foreclosed on more quickly or denied access to modification programs because of their race, Comptroller of the Currency John Dugan said in a speech at a compliance conference Monday. “In today’s difficult economy, with so many mortgages having problems, banks also need to be sure that similarly situated borrowers who default or become delinquent are treated similarly, with no variations based on prohibited factors like race or gender,” he said. He encouraged banks to keep up with compliance, and noted that fair lending will be a priority compliance issue in the next year ... * WASHINGTON (7/9/08)--The Office of Thrift Supervision (OTS) has released its Mortgage Metrics Report , which covers activity by OTS-regulated mortgage servicers to help borrowers avoid foreclosure for the quarter ending March 31. The report provides a baseline of data to track loan modifications and repayment plans. It also assesses the effectiveness of foreclosure prevention initiatives ... * WASHINGTON (7/9/08)--Federal banking and thrift agencies issued a statement Tuesday outlining the qualifications for organizations implementing Basel II, the new capital adequacy framework for financial institutions. The process has three stages: adoption of an implementation plan; completion of a satisfactory parallel run; and advancement through three transitional periods ...

Bernanke looks at future protections

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WASHINGTON (7/9/08)—The financial turmoil since last August underscores the need to find ways to make the financial system more resilient and stable, said Federal Reserve Board Chairman Ben Bernanke in a speech Tuesday. Bernanke noted that financial crises occur periodically, have done so for hundreds of years, and that it is “unrealistic to hope” they can be entirely limited. However, recent experience has served to underscore the serious economic costs of financial instability, he said, adding the Fed will continue to work toward improving its ability to “play its necessary role” of supporting economic growth and making credit available to all qualified borrowers. He said that in an effort to prevent a repeat of the current problems in the mortgage market, the Fed will issue new rules next week aimed at protecting future homebuyers from the questionable lending practices that have caused the upheaval. (see related story, “Fed vote on HOEPA slated for July 14”) Bernanke also indicated that the Fed may allow more time for Wall Street firms to make use of the Fed’s emergency loan program. In March, the Fed allowed investment houses temporary access to the Fed’s overnight loan system—a cash source previously available only to commercial banks. The temporary access is supposed to expire mid-September. Into the future, Bernanke said, the Fed will work collaboratively with regulators both here and abroad as well as with financial the firms themselves, to redouble efforts to strengthen the capital positions, liquidity reserves, and risk-management practices of the institutions that are supervised by the Fed. “Shareholders, managers, and investors are likewise taking steps to protect their interests in a period of continued market strains,” he said. Use the resource link below to read Bernanke’s full comments.

Fed vote on mortgage rules slated for July 14

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WASHINGTON (7/9/08)—The Federal Reserve Board plans to vote July 14 on its proposed changes under the Home Ownership and Equity Protection Act (HOEPA) to address unfair or deceptive mortgage lending practices that would apply to subprime loans offered by all mortgage lenders. The Fed developed its plan, unveiled last December, in response to criticism on Capitol Hill that poor underwriting practices helped fuel the country’s housing and mortgage crises. Under the proposal, lenders would have to ensure borrowers have the ability to repay a loan, verify the borrower’s income, impose no prepayment penalties within 60 days of a mortgage reset, and provide escrow accounts for taxes and insurance for the first 12 months of a loan. The plan also bolsters disclosure practices. The Credit Union National Association (CUNA) generally supports the Fed’s use of its authority under HOEPA and the Truth in Lending Act (TILA) to issue its proposed rules intended to protect consumers from unfair and deceptive home mortgage lending and advertising practices. However, in a letter commenting on the specifics of the plan, CUNA has warned the Fed that modifications are necessary to ensure the rule does not cover more loans than the Fed may intend. “For the protections that apply to ‘high-cost’ loans, we were concerned that the threshold would be too low and would cover not only all subprime loans, but some prime loans as well, which we believe is not what the Fed intended,” according to Jeffrey Bloch, CUNA senior assistant general counsel. The Fed HOEPA proposal is one of many in the pipeline that will amend Regulation Z. For instance, the Fed issued a comprehensive proposal last year to address rules that apply to credit cards and other types of "open-end" loans. It issued additional proposals recently to coincide with the latest plans to address unfair and deceptive practices for credit cards and overdraft protection plans. These may be finalized by the end of the year. The Fed is also expected to issue another comprehensive proposal, probably within the next year, that will amend the Regulation Z rules for mortgage loans and other types of "closed-end" credit, such as auto loans, in which repayment periods are fixed. Separately, the U.S. Department of Housing and Urban Development is floating plan to change its rules that implement the Real Estate Settlement Procedures Act (RESPA) to adjust mortgage loan disclosures. HUD intends to finalize those rules by the end of the year. CUNA Comment Letter

Inside Washington (07/07/2008)

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* WASHINGTON (7/8/08)--A rule by the Federal Deposit Insurance Corp. could help students learn financial skills and give financial institutions a way to serve the underserved by allowing banks to operate inside schools (American Banker July 7). The rule allows banks to hire students as tellers to learn financial skills, but some see it as an opportunity to grow business. James Maloney, chairman and CEO of Mitchell Bank in Milwaukee, said deposits from a branch at South Division High School totaled $870,000 at one point. The branch also made $300,000 in loans to staff and parents, he said. Park Federal Savings Bank, Chicago, said the purpose of its in-school branch is community service, and that the branch is an “expense item” ... * WASHINGTON (7/8/08)--The Federal Reserve Board and the Securities and Exchange Commission (SEC) Monday announced they had reached a memorandum of understanding (MOU) to share information on clearing and settling banks’ and investment firms’ transactions, bank brokerage activities and anti-money laundering measures (The Wall Street Journal July 7). “The MOU finalized between the SEC and the Federal Reserve is consistent with the long-term vision of the Treasury’s Blueprint for a Modernized Regulatory Structure and should help inform future decisions as our Congress considers how to modernize and improve our regulatory structure,” said Treasury Secretary Henry Paulson Jr. The Bush administration has proposed changes to the U.S. financial system. Credit Union National Association President/CEO Dan Mica has spoken out against the Treasury blueprint, saying it would eliminate credit unions as they function today ... * WASHINGTON (7/8/08)--The Treasury Department has released Notice 2008-59 regarding health savings accounts (HSAs). Since HSAs were created as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Treasury and the Internal Revenue Service have issued a large number of formal guidance items containing questions and answers on HSAs. The notice contains more than 40 new frequently asked questions and answers that cover topics including: who is eligible; issues related to high deductible health plans; contributions to HSAs; distributions from HSAs; and establishing an HSA ...

House vote expected soon on MSB bill

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WASHINGTON (7/8/08)—The U.S. House of Representatives returns to session today and is scheduled to take up a list of bills, including one of particular interest to credit unions—the Money Services Business Act (H.R. 4049). That bill is intended to encourage credit unions and banks to serve money services businesses (MSBs) by clarifying that they would not be responsible for whether the MSB is complying with anti-money laundering laws and any other applicable Bank Secrecy Act (BSA) requirements. The bill was introduced in 2007 by Rep. Carolyn Maloney, chairman of the House Financial Services subcommittee on financial institutions. Other members of the House Financial Services Committee to back the bill include its chairman, Rep. Barney Frank (D-Mass.), and ranking member Spencer Bachus of Alabama. In 2006, the Financial Crimes Enforcement Network (FinCEN) began seeking public comment regarding the impact of BSA regulations on the ability of money services businesses (MSBs) to open and maintain accounts and obtain other banking services at depository institutions. The request for comment, printed in the Federal Register, noted, "(FinCEN is) seeking input to assist in our efforts to ensure that money services businesses that comply with the law have reasonable access to banking services and, specifically, to avoid any unintended misinterpretation of Bank Secrecy Act requirements that could adversely affect the issue of the establishment and maintenance of account relationships and other banking services for money services businesses by banking institutions." MSBs are nonbank financial institutions that provide one or more of such services as money orders, traveler’s checks, money transmissions, check cashing, currency exchange, currency dealing, or issuing, selling or redeeming stored-value cards. As of May 15, a FinCEN list maintained information on 35,245 registered MSBs.

Subcommittee to review housing grant issues

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WASHINGTON (7/8/08)—A House subcommittee this week will examine funding for federal housing and community development programs and, more specifically, how such things as cancellation of unspent funds can affect the functioning of such programs. The House Financial Services subcommittee on housing and community development, lead by Rep. Maxine Waters (D-Calif.), will scrutinize current federal spending requirements for such programs as: HOPE VI, Section 202 Housing for the Elderly, Brownfields, and Homeless Assistance Grants. The hearing will also look into efforts by the Department of Housing and Urban Development (HUD) to work with grantees to spend funds efficiently, with a particular focus on HUD’s efforts to work with FY 2002 HOPE VI grantees facing cancellation of their grants on September 30th of this year. Legislation introduced by Reps. Corrine Brown (D-Fla.) and John Mica (R-Fla.), directly addressing the issue (H.R. 6347), will also be discussed. A witness list had not yet been made public Monday.

Time tight hope alive for reg relief

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WASHINGTON (7/8/08)—Ryan Donovan, vice president of legislative affairs for the Credit Union National Association (CUNA), said Monday there is reason to be hopeful that regulatory relief legislation for credit unions will make it through the Senate this session, but warned that it is far from a sure thing. “I’ve said it before—the congressional calendar is not our friend this year,” Donovan said. However, he added that through CUNA’s work on behalf of regulatory relief legislation in the Senate, he believes such a bill could move in the Senate this year despite time constraints. The logical vehicle, he noted, is the House-passed Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA, H.R. 6312). That bill passed the House by voice vote and was referred to the Senate on June 25. Donovan noted that CUBTRRA holds a number of substantive elements that will serve credit union members well, especially provisions that ease field of membership and member business lending (MBL) restrictions in underserved areas. “We expect both the Senate and the House to be in session this week and the next three weeks before recessing from Aug. 1 to Sept. 8,” Donovan said. “When the Congress returns in September, they are scheduled to be in session until September 26th.” “As always, these dates are subject to change and often do,” Donovan said, and added, “ “The point is: time is short for legislative action.” He encouraged credit unions to continue to contact federal lawmakers to encourage passage of credit union regulatory relief. Use the resource link below for more CUBTRRA information.

Fryzel says will be ready by Julys end

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ALEXANDRIA, Va. (7/8/08)—Michael Fryzel issued a statement through the National Credit Union Administration (NCUA) Monday stating he will be ready to take the oath of office and assume the duties as chairman at the end of July. “As required by law, I will be dissolving my law practice in Illinois during this interim period. I eagerly anticipate the commencement of my service as chairman,” Fryzel said. Fryzel was confirmed by the Senate to succeed JoAnn Johnson at the agency and is expected to be designated chairman by the president once he takes his oath of office. Johnson had said recently that she was prepared to stay at the helm of the agency until Aug. 1 to give Fryzel a chance to wrap up pending matters prior to joining the NCUA. Fryzel was with the Illinois Department of Financial Institutions from 1977 to 1989 and headed the agency from 1982 to 1989. Upon leaving that position, Fryzel founded his private law practice, the Law Offices of Michael Fryzel, which specialized in financial regulatory and real estate law.

NCUA opinion clarifies incidental powers

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WASHINGTON (7/7/08)—It makes some sense that a recent National Credit Union Administration (NCUA) opinion letter originated from an inquiry from Texas—a state known for its love and support of school-level sports. In answering a question from Texas Tech FCU, Lubbock, the NCUA stated it is within a federal credit union’s incidental powers to receive payments for gift cards and track payments for one of its members. The Texas credit union was checking to see if it could perform those functions related to gift cards to be offered by Texas Tech University’s athletic department for purchases of athletic event tickets, concession goods and related apparel at the university’s athletic store. The NCUA letter signing off on the activity said: “Essentially, under this proposal, the FCU would receive and transfer funds on behalf of its member, which are traditional financial services credit unions perform for their members but, in this instance, through the electronic media represented by the gift cards, a type of stored value card product.” In a footnote, the NCUA brings up the following membership issues:
* A threshold issue for the FCU and the Athletic Department is establishing the Athletic Department as a member. We are not aware whether the Athletic Department would be considered a separate legal entity from Texas Tech University and, as an alternative, we suggest you consult with NCUA’s regional office regarding having the FCU’s sponsor, Texas Tech University, join as a member of the FCU if it has not done so already and have it be the issuer. Another option, if the Athletic Department is not a separate legal entity and eligible in its own right for membership, might be that it could be eligible under the provision in your charter for an organization of persons who are already enumerated as eligible in your charter.
In the proposed arrangement, fans would access information about gift cards on the athletic department’s web site. When a fan initiates a card purchase, he or she would be transferred by an electronic link to the credit union’s website. Also on the topic of incidental powers, credit unions are being asked to comment on a recent NCUA plan to update its rule on incidental powers for federal credit unions. The proposal would add illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities, and the Credit Union National Association seeks credit union comment by July 15. Comments are due to the NCUA by July 28.

Inside Washington (07/04/2008)

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* WASHINGTON (7/7/08)--The Federal Deposit Insurance Corp. has sent a financial institution letter to banks regarding other real estate. “Continued weakness in the housing market and the rapid rise in foreclosures have increased the potential for higher levels of other real estate (ORE) held by FDIC-supervised institutions,” the agency said. “The letter reminds bank management of the importance of developing and implementing policies and procedures for acquiring, holding, and disposing of other real estate” ... * WASHINGTON (7/7/08)--Treasury Secretary Henry Paulson is backing an idea to create a receivership mechanism for investment banks that fail. A resolution process that helps the financial system curb the failure of a large firm is needed, he said (American Banker July 3). His comments match those made by Federal Deposit Insurance Corp. Chairman Sheila Bair, who two weeks ago said investment firms should have receivership processes similar to ones used by commercial banks. Paulson testifies Thursday in front of the House Financial Services Committee with Federal Reserve Board Chairman Ben Bernanke regarding the need for regulatory reform ... * WASHINGTON (7/7/08)--The Office of Thrift Supervision (OTS) has rejected Sen. Charles Schumer’s (D-N.Y.) request for data on IndyMac Bancorp (American Banker July 3). Schumer had asked the agency to provide him with information regarding his concerns about IndyMac’s solvency. IndyMac said Monday that depositors removed $100 million from the company when news of Schumer’s request surfaced. Schumer said the company’s problems result from management. OTS said it is in control of IndyMac’s condition ... * WASHINGTON (7/7/08)--The Treasury Department last week sent out 10.025 million economic stimulus payments to households, totaling $7.775 billion. So far, the department has sent out 104.875 million payments, totaling $86.079 billion. Payments will continue through mid-July ... * WASHINGTON (7/7/08)--Recovery of the financial market will likely be slow, Federal Reserve Board Gov. Frederic Mishkin said Wednesday (American Banker July 3). The markets are showing signs of progress, but a quick comeback is not likely, he told an economic forum in Israel. The troubled housing market has caused a weak labor market and consumers are struggling to obtain credit, he said. Mishkin will leave the Fed in August to return to Columbia University ...

Justice Dept. opposed to interchange bill

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WASHINGTON (7/7/08)—The U.S. Department of Justice last week voiced its opposition to a bill, the Credit Card Fair Fee Act (H.R. 5546), which would give a government-appointed tribunal power to set credit and debit card interchange rates. In a letter to Rep. Lamar Smith (R-Texas), who sought the department’s views, Principal Deputy Assistant Attorney General Keith Nelson wrote that H.R. 5546 “creates a broad immunity under the antitrust laws” for merchants and issuers jointly to negotiate interchange fees and terms of access to a credit and debit card network above a certain size. “The antitrust laws are the chief legal protector of the free-market principles on which the American economy is based. Companies free from competitive pressures have incentives to raise prices, reduce output, and limit investments in expansion and innovation to the detriment of the American consumer,” Nelson wrote. Nelson also warned that bill seeks to counter “perceived market power on the part of large credit card networks” by shifting power to merchants negotiating with those networks. “It would do this by exempting from the antitrust laws joint negotiations of merchants with any network electronic payment system that has been used for at least 20% of the combined dollar value of U.S. credit, signature-based debit, and PIN-based debit card payments. “From a policy perspective, the Department does not support legislatively establishing a buy-side monopoly (or monopsony) to counteract any existing market power,” the Justice letter said. It added that such a result also could increase harm to competition and consumers. The Credit Union National Association (CUNA) also opposes statutory and rulemaking changes that would regulate interchange fees as such action would adversely affect consumer options, competition and technological innovation. CUNA maintains that interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. To read more points made by the Justice Department letter use the resource link below.

Comment sought on MBL rule changes

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WASHINGTON (7/7/08)—As part of its policy to review all existing regulations every three years, the National Credit Union Administration (NCUA) is seeking comment on how its member business lending (MBL) rules should be revised or clarified. The Credit Union National Association has issued a request for comments by August 14 on all aspects of the NCUA MBL rules, while highlighting the areas of specific interest to the agency. The NCUA issued the advance notice of proposed rulemaking at its May meeting and noted it is specifically reviewing the following provisions:
* Loan-to-value (LTV) ratio requirements; * Collateral and security requirements; * Credit union service organization (CUSO) involvement in the MBL process; * MBL loan participations; and * Waivers.
Comments are due to the agency by August 25. CUNA Deputy General Counsel Mary Dunn said CUNA, working with leagues and key committees and subcommittees, will be reaching out early in the comment period to other credit union officials with MBL expertise and concerns to ensure its comment letter addresses the range of MBL issues. Use the resource link below for more information on the NCUA proposal and for CUNA’s complete comment call.

Inside Washington (07/02/2008)

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* WASHINGTON (7/3/08)--The Federal Deposit Insurance Corp. (FDIC) is encouraging banks to follow certain legal requirements when reducing or suspending home equity lines of credit (HELOCs). The FDIC sent a financial institution letter last week outlining its regulatory considerations. The agency urged institutions to work with borrowers when possible to mitigate financial hardships. It also warned that banks could face penalties for failing the meet the outlined legal standards ...

CUs asked to comment on incidental powers

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WASHINGTON (7/3/08)—Credit unions are being asked to comment on a recent National Credit Union Administration (NCUA) plan to update its rule on incidental powers for federal credit unions. The NCUA proposal would add illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities, and the Credit Union National Association seeks credit union comment by July 15. Specifically CUNA is asking:
* What issues may arise from the provision of the proposal to include foreign credit unions under the correspondent services category? * Are there any unforeseen problems that may arise in including payroll services within the operational programs category? * Are there any specific concerns with the provision of the proposal to clarify that finder activities include an FCU’s negotiation of group discounts? * Are there any specific concerns with the provision of the proposal to clarify that finder activities include the performance of administrative functions for outside vendors? * Is the inclusion of insurance as an illustration under finder activities likely to add clarification? * And, are there any other comments or concerns regarding NCUA’s proposed rule?
Comments are due to the agency by July 28. For more details on the NCUA proposal and the CUNA comment call, use the resource link below.

More power for CUSOs no records access says CUNA

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WASHINGTON (7/3/08)—The National Credit Union Administration (NCUA) is moving in the right direction with its proposal to expand credit union service organization (CUSO) activities, but could go further to enhance CUSO’s abilities to meet credit unions’ needs, according to the Credit Union National Association (CUNA). CUNA urged the NCUA to broaden CUSO authority by allowing them to choose from the range of activities permissible for federal credit unions. In particular, CUSOs should be able to engage in indirect automobile lending services and to sell loan participation interest in a credit card portfolio to credit unions, CUNA said in a recent comment letter. The NCUA’s proposal would apply provisions of the CUSO rule for federal credit unions to state-chartered credit unions regarding corporate separateness and access to books and records of the CUSO. CUNA does not support these revisions because it believes they would encroach on the authority of state regulators to oversee their credit unions’ activities. CUNA also does not agree with a provision in the CUSO proposal that would require all federal credit unions with net worth below 5 to seek prior approval from NCUA to recapitalize an insolvent CUSO. Rather, CUNA recommended, credit unions with 4-5% net worth should only be required to provide prior notice to the agency, which NCUA could pursue if there are concerns. To read the complete CUNA comment letter, use the resource link below.

CUs encouraged to seek VITA grants

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ALEXANDRIA, Va. (7/3/08)—Another layer is being plotted for the National Credit Union Administration’s (NCUA’s) efforts to encourage credit unions to offer Volunteer Income Tax Assistance (VITA) services to their membership and community. The agency announced Wednesday that it will partner with the U.S. Internal Revenue Service (IRS) to produce an informational video on the IRS’ VITA program. The video will be entitled, “Establishing a VITA Site: How and Why.” VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations receive IRS provided training in the preparation of basic tax returns and establishment of tax preparation sites. The video will encourage credit unions to offer VITA services to their membership and community, with a special emphasis on use of the IRS VITA Grant Program, according to an NCUA release. Credit unions are eligible to apply to that program, an $8 million, one-year initiative designed to extend VITA Program services to underserved populations and hard-to-reach areas, both urban and rural. A notice in the July 1 Federal Register noted that applications for the VITA matching grant program currently are available and the deadline for submissions is Sept. 2. Funding for the program was approved by the 2008 Treasury appropriations legislation. The video, according to the NCUA, is designed to complement the agency’s 2007 webinar focusing on credit union partnerships with community groups in providing and promoting VITA services. The NCUA plans to have the video posted on its NCUA’s The Resource Connection website by August 1.

Johnson to stay at helm til August

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ALEXANDRIA, Va. (7/3/08)—JoAnn Johnson is expected to stay in her position as chairman of the National Credit Union Administration (NCUA) until Aug. 1 and will be the one to lead the next open board meeting July 24. At a farewell gathering of credit union representatives held at the agency headquarters here Wednesday, Johnson said she has agreed to stay on at the agency until the first of August so her successor, Michael Fryzel, can wrap up any pending personal matters. Fryzel was confirmed by the Senate last week to fill a vacancy that will be created with the exit of Johnson. He has not yet been sworn in. President George W. Bush has indicated he will designate Fryzel as chairman. At the sendoff, Credit Union National Association President/CEO Dan Mica commended Johnson for her concern for credit union members and her appreciation of the credit union system during her tenure on the NCUA board. Johnson has served for six years, and has been chairman for the final four. In what was called “a moving tribute” by a participant, NCUA Executive Director Leonard Skiles described the close working relationship the departing chairman has had with the agency staff. Johnson has said that when she leaves the NCUA, she looks forward to returning to "my family, and my roots, in Iowa." The NCUA staff presented Johnson with a certificate for a new sewing machine to greet her when she arrives home.

Inside Washington (07/01/2008)

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* WASHINGTON (7/2/08)--Financial institutions have responded to changes proposed by the Financial Crimes Enforcement Network (FinCEN) to broaden exemptions to currency transaction report (CTR) requirements. Bankers have criticized FinCEN’s proposed changes, saying they do not save time or effort in the cumbersome filings. Bank of America files the most CTRs--more than 2 million last year. The bank used FinCEN’s exemptions 3,650 times. (American Banker July 1). The Credit Union National Association recommends that FinCEN should review the $10,000 threshold for filing a CTR and adjust it for inflation and allow financial institutions make a good-faith, case-by-case determination of whether an otherwise eligible member frequently engaged in currency transactions of more than $10,000 when designating a Phase II exemption ... * WASHINGTON (7/2/08)—Information on making home loans to low- and moderate-income households will be the focus next week in two Federal Deposit Insurance Corp. (FDIC) events. Treasury Secretary Henry Paulson, JP Morgan Chase and Co. chief executive James Dimon, and Federal Reserve Board Chairman Ben Bernanke will speak at the forum on mortgage lending. Topics are to include such things as reintroducing standard loan underwriting and pricing in the low-income mortgage market. Also on the agenda, discussion about profitable approaches to lending to low- and moderate-income borrowers, and how community-building can help foster homeownership. (American Banker July 1). The next day, the agency’s advisory committee on economic inclusion is expected to undergo similar discussion. The committee comprises consumer advocates, bankers and federal officials ... * WASHINGTON (7/2/08)--The Federal Reserve Board sent the Department of Housing and Urban Development (HUD) a letter June 13, arguing that the two should consult with each other to revise a rule on mortgage disclosures (American Banker July 1). HUD should align its plan with the Fed’s update of Truth in Lending Act regulations, the letter said. HUD is required by the Real Estate Settlement Procedures Act to update its disclosures ... * WASHINGTON (7/2/08)--Those affected by flooding have increased benefits, including access to loans of up to $14,000 without collateral, and a $500,000 increase in the disaster loan cap to businesses, said Jovita Carranza, acting administrator of the U.S. Small Business Administration, during a tour of Iowa yesterday. The changes were recently signed into law under the Small Business Disaster Response and Loan Improvement Act of the 2008 Farm Bill and were implemented by the SBA this week. The disaster loan cap increased to $2 million from $1.5 million, and the 20% mitigation measure formula has changed from total loan eligibility to total loss eligibility, she said. “Midwest residents whose homes and businesses have been destroyed or damaged by severe flooding will have enhanced support,” she said. “I encourage disaster victims to use resources and counseling to help them through this difficult time” ...

Patelco assumes Cal State 9 Sterlent

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ALEXANDRIA, Va. (7/2/08)—Cal State 9 CU and Sterlent CU, both California state-chartered institutions, were liquidated by the National Credit Union Administration (NCUA) yesterday. Patelco CU of San Francisco purchased assets and assumed most shares of both institutions. The NCUA, as conservator of Cal State 9, put the credit union up for bid in March hoping to negotiate a combination with another credit union. The Region V director said at the time that such a “purchase and assumption” arrangement represented the most financially sound decision for Cal Sate 9 and was in the best interest of its members. The $339 million-asset, Concord.-based Cal State 9 had been placed under the management of the NCUA in conservatorship in November 2007 after suffering setbacks linked to the sinking residential real estate market in the area. The Cal State 9 Credit Union liquidation and purchase and assumption by Patelco had been announced May 22, and was completed with the NCUA action Tuesday. In the case of Sterlent, the Pleasanton credit union reported a net loss of $5.5 million during the first quarter of 2008. Its credit quality issues stemmed from a home equity loan program it implemented in 2003. Its management ended the program in late 2006, according to a release issued by Patelco in May, when that credit union stepped in to help the $100 million-asset Sterlent. Patelco will continue operating branches of both purchased credit union, and member accounts in all involved credit unions are federally insured by the National Credit Union Share Insurance Fund (NCUSIF) up to at least $100,000. Patelco issued the following statement concerning their purchase and assumption arrangements: “We are thrilled to be able to continue providing for the financial needs of both credit unions’ members, and we are looking forward to the many opportunities we have to develop deeper ties in the communities they serve.”

Hearings to study capital reserve requirements more

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WASHINGTON (7/2/08)--Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke will appear at the first of a series of hearings on the policy implications of the transformation of domestic and international financial markets, according to a Capitol Hill announcement. House Financial Services Committee Chairman Barney Frank (D-Mass.) Tuesday issued the release noting that a primary focus of the hearings will the rise of potential systemic risk associated with the dramatic growth in the share of assets held outside the commercial banking system, the complex arrangements that link firms that are regulated differently (or not at all) and the increasing amount of leverage. Specifically, the chairman intends the hearings to examine:
* Current state of the financial regulatory system, both in the United States and abroad, and ways to measure and limit risk without stifling innovations and improve market liquidity and breadth; * The implications of providing investment banks and others access to the discount window: * In light of the collapse of Bear Stearns, proposals to improve the regulatory structure to better assess and mitigate systemic risk to avoid a similar or more serious crisis in the future: * The need for enhanced capital and reserve requirements for financial firms: and * The adequacy of current powers of the Federal Reserve and other regulatory agencies to protect the financial system and the taxpayers.
Ryan Donovan, Credit Union National Association vice president of legislative affairs, said Tuesday, “ We are pleased to see that one of the items on which these hearings will focus is the need for enhanced capital and reserve requirements. “This is an issue that NCUA as well as the credit union movement have been asking Congress to address with respect to credit unions for several years." The committee also plans to invite New York Federal Reserve President Timothy Geithner, Securities and Exchange Commission Chairman Christopher Cox, other federal regulators, academics, economists and market participants to present views at subsequent hearings later in July and continuing in the fall.

Johnson assesses service during NCUA tenure

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ALEXANDRIA, Va. (7/2/08)—In advance of exiting her position at the National Credit Union Administration (NCUA), JoAnn Johnson said that during her tenure as chairman she had the privilege to shape a regulatory regime stringent enough to exact unmatched safety and soundness for credit unions and flexible enough to promote innovation in financial services. Johnson noted that during her chairmanship a number of major issues “caused NCUA to draw upon considerable financial, legal and legislative resources in order to continue responsible stewardship of the credit union industry.” She named the “increased congressional scrutiny of the credit union tax exemption and the agency’s proactive response to it, the troubling emergence of a ‘cottage industry’ devoted to engineering the conversion of member-owned, cooperative credit unions to for-profit banks, and the credit/mortgage crisis” as some of the challenges that made her work exciting personally and professionally. The credit union member, Johnson said, has been the common denominator in the NCUA’s work in these areas and the “central animating principle” that she tried to bring to her regulation of credit unions. “And I take no small measure of satisfaction in noting that the elevation of the member, while simple in the description, is actually a very profound and complex policy achievement that will pay dividends for the credit union industry as it evolves,” the chairman added. Johnson made her remarks in a statement issued Monday as she prepares to leave the NCUA after six years of service, four as chairman of the agency. Last week, the Senate confirmed President George W. Bush’s choice of Michael Fryzel to succeed Johnson. The president has said he intends to designate Fryzel as chairman.

Hood Risk mitigation speakers announced

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ALEXANDRIA, Va. (7/2/08)-- National Credit Union Administration (NCUA) Vice Chairman Rodney Hood released the speakers list for the upcoming Risk Mitigation Summit on August 7. The summit, to be conducted at the Federal Reserve Bank of Chicago, is a free, one-day event highlighting the latest trends in risk management and analysis from both an operational and oversight perspective. Top leaders from both government and industry will address innovative techniques for risk mitigation. Currently slated to speak are:
* John Hope Bryant, founder, chairman, and CEO of Operation Hope, Inc.; * Nathaniel Wuerffel, AVP Enterprise Risk management for the Federal Reserve Bank of Chicago; * Leo Tilman, noted as a credit and interest rate expert; * Donna Gambrell, director of the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund; * Chris Copeland, corporate risk manager, CUNA Mutual Group; and * John Kutchey, director of the division of risk management, NCUA’s Office of Examination and Insurance.
Hood unveiled his speakers list at the Corporate One FCU Enterprise Wide Risk Management (ERM) Conference. Addressing that gathering, Hood said that fully adopting ERM plans is the best strategy for credit unions to prepare for the new risk-based exams. He added, “A key priority of mine as a regulator is to focus on maintaining the safety and soundness of America’s credit unions while encouraging the economic growth and opportunity for their members. Managing risks successfully, not simply avoiding them, is essential in accomplishing this mission.” Use the resource link below to visit the NCUA website for more summit information.