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Inside Washington (07/30/2010)

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* WASHINGTON (8/2/10)--The Transaction Account Guarantee (TAG) program, which provides unlimited deposit insurance coverage for non-interest-bearing checking accounts, has sparked some questions from financial industry representatives about how the government will carry out the extension of TAG coverage (American Banker July 30). The original TAG program was voluntary, but the recently enacted regulatory reform bill makes the program mandatory. Some worry that banks who do not need the coverage will still have to pay for it. While the law does not institute a fee for banks to pay for the coverage, some observers told Banker they are concerned that the Federal Deposit Insurance Corp.’s risk profile will increase if institutions that opt out of the program are covered. The agency could include zero-interest deposits in its ratio of reserves--which could raise premiums, the publication said. TAG was originally launched in 2008 and lawmakers gave banks until 2012 to continue receiving coverage under TAG. About 5,800 banks participate in the program ... * WASHINGTON (8/2/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.), committee ranking Republican member, urged President Barack Obama to appoint a permanent director for the Federal Housing Finance Administration (FHFA). The position has been vacant since the agency was created two years ago (American Banker July 30). Also two years ago, when Fannie Mae and Freddie Mac were placed in conservatorship, policymakers did not create a plan for their futures, but Dodd and Shelby noted that the FHFA director would be in charge of the enterprises. FHFA has an acting director, Edward J. DeMarco, but a permanent one should be appointed, they said ... * WASHINGTON (8/2/10)--Financial institutions are prepping for the regulatory reform bill’s impact, according to American Banker (July 30). The publication likened the preparations to the strategy of hockey player Wayne Gretzky, who skated not to where the hockey puck had been, but rather “where it was going to be.” Chris Thompson, head of risk management at consulting firm Accenture, said the firm is advising its clients to look at the changes they have to make, and “how you take out costs and make profits more efficiently.” Often, financial institutions move too quickly to comply with new regulations and then go back later to offset the impact, he said. It will be hard to absorb the cost of compliance without taking some steps to cushion the blow, he told the publication. Some institutions, like Bank of America, told Banker they are assessing the rules before reacting to them. Other banks, like SunTrust, have revised early forecasts to reflect some reform costs ...

NCUA takes action on two CUs in conservatorship

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ALEXANDRIA, Va. (8/2/10)--The National Credit Union Administration (NCUA) last week was appointed liquidating agent of Fort Collins, Colo.-based Norbel CU, which was then purchased by Security Service FCU. And on Friday, the agency placed Family First FCU, Orem, Utah, into conservatorship. Security Service FCU, based in San Antonio, Texas, and which currently holds $5.6 billion in assets from 750,000 members, will acquire $120 million in assets and 16,098 members from Norbel. Security Service FCU President/CEO David Reynolds in a release said that the new members will “continue to receive seamless, uninterrupted service and will enjoy Security Service’s market-leading rates for deposit and loan products.” Although Security Service is based out of San Antonio, one-third of its members are situated in Colorado. The credit union also has several locations in Texas. In the conservatorship of Family First FCU, which NCUA attributed to a "declining financial condition," stemming from "problems in its loan portfolio," NCUA said its goal is to continue credit union service to the credit union's 19,476 members and ensure safe and sound credit union operations. The $139.5 million asset credit union provides service to people residing in Utah County, Utah. Members can conduct normal financial transactions at the credit union. For the full NCUA releases, use the resource links.

CUNA iCompliance Challengei covers Reg E overdraft notices

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WASHINGTON (8/2/10)--In the July edition of Compliance Challenge, the Credit Union National Association (CUNA) addresses questions regarding Regulation E. The new Regulation E overdraft rules for ATM and one-time debit card transactions require credit unions to provide members with the right to opt in, or affirmatively consent, to a credit union's overdraft service for ATM and one-time debit card transactions. Under Regulation E, credit union members must opt-in for overdraft protection by Aug. 15. According to CUNA, credit union websites may not be set up to compel a member to make an opt-in choice. While the credit union featured in the Compliance Challenge sought to display a pop-up screen that would request that members opt-in to overdraft services before moving on to the main home banking site, CUNA said that the member must be allowed to completely reject any overdraft service. CUNA suggested that the credit union provide an “ask me later” option that would remind the member of the availability of the overdraft program when they log on to the credit union site at a later time. While the pop-up screen proposal would have violated Reg E, CUNA said that a credit union whose overdraft confirmation notices are delayed by a computer error are not in violation of the rule. Credit unions that find themselves in this situation may charge overdraft fees to member accounts as long as they have adopted and follow reasonable procedures designed to ensure that overdraft fees are assessed only in connection with transactions paid after the confirmation notice has been mailed or delivered to the member. CUNA noted that the Fed’s recent clarifications to the Reg E overdraft rule recognized that there may be certain instances where financial institutions inadvertently assesses a fee before the confirmation is mailed or delivered. In these cases, the credit union’s adherence to the appropriate policies and procedures will save the institution from a compliance violation, CUNA said. For the full Compliance Challenge, use the resource link.

NCUA starts August with closed board meeting

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ALEXANDRIA, Va. (8/2/10)—The National Credit Union Administration (NCUA) will begin August with another closed board meeting, the 13th held this year. The meeting, which will take place on Tuesday at 8:30 A.M. E.T., follows a trio of closed board meetings held in July. According to the NCUA, the meeting will cover supervisory activities. For the full NCUA release, use the resource link.

Recent Hill battle brings great MBL recognition CUNA

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WASHINGTON (7/30/10)--The recent Capitol Hill battle that embroiled a small business jobs package has taken its toll on that legislation, but credit unions have been able to use the process to shine a positive light on increased member business lending, said Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill Thursday. CUNA and credit unions worked fervently to add a provision to the small business bill that would increase credit union business lending authority to 27.5% of total assets, up from the current 12.25% cap. Sen. Mark Udall (D-Colo.) crafted an amendment proposing that increase and has urged his colleagues in the Senate to add it to the body of the bill. During the process, CUNA and credit unions have been able to make the case for increased MBL authority to lawmakers and in the media. The effort, in fact, gained the backing of the Obama administration. “This is the closest credit unions have ever gotten in their pursuit for increased MBL authority. Lawmakers, and the nation at large, have learned how much this simple legislative change could do to help our nation and its small businesses,” Magill said late Thursday. As Udall has noted on the Senate floor, CUNA estimates that more than $10 billion in credit could become available if the MBL cap were lifted, even if just to 25%. The statutory change would also serve to add 108,000 jobs into a struggling market. “The overall bill may be a victim of politics. But credit unions have received attention and recognition on Capitol Hill, and we'll be back at the first opportunity to finish the job,” Magill said.

Collins strips interchange ban from appropriations bill

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WASHIINGTON (7/30/10)--Sen. Susan Collins (R-Maine) Thursday successfully offered an amendment to an appropriations bill that struck language that would have banned payment card networks from charging the federal government a credit card interchange rate higher than the lowest interchange rate available on the market. The Collins amendment, supported by the Credit Union National Association (CUNA), instead instructs the Government Accountability Office (GAO) to conduct a study on the feasibility of allowing the federal government to impose convenience fees for the use of credit cards for the purchase of goods and services. John Murphy and the Maine league also worked closely with the senator. CUNA President/CEO Bill Cheney underscored, "While we know the interchange battle will continue on other legislation, this is an important victory and we are very appreciative of Senator Collins's leadership on this issue." The amendment was passed by the Senate Appropriations Committee by voice vote. In backing the amendment, CUNA said in the a letter to Collins, that proponents of recent interchange language in the Dodd-Frank Act, which allows the government to set interchange fees, “profess that their intent is not to harm small issuers.” Cheney wrote, “The stinging impact of the reduction of interchange fee revenue hits the smaller institutions disproportionately, and, in the case of credit unions, trickles down to the credit union member. “Large for-profit institutions can more easily absorb a reduction in interchange fee revenue; and, inasmuch as the interchange fee is a fee paid to the issuer, the impact on the payment card networks is negligible. The erosion of interchange fee revenue seriously threatens credit unions’ ability to offer low-cost access to financial services that is often much lower than what banks offer.” Also of interest to credit unions in the bill before the Appropriations Committee are provisions that would set funding for the U.S. Treasury Department Community Development Financial Institutions (CDFI) Fund, and the National Credit Union Administration's Community Development Revolving Loan Fund (CDRLF), and Central Liquidity Facility.

Golden parachutes would end for execs at low-ranked CUs

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ALEXANDRIA, Va. (7/30/10)--The practice of providing so-called “golden parachutes” to departing executives would be prohibited for federally insured credit unions with CAMEL Codes 4 or 5 or in an otherwise troubled condition under a proposed rule approved by the National Credit Union Administration (NCUA) on Thursday. If finalized, the rules would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. According to an NCUA release, the rule aims to safeguard the National Credit Union Share insurance fund (NCUSIF) by “preventing the wrongful or improper disposition” of credit union assets.” The rule also seeks to “inhibit unwarranted rewards” for credit union executives that may have contributed to their credit unions financial troubles. The rule also provides credit unions with “greater clarity on the distinction between legitimate employee severance payments and improper golden parachute payments.” The prohibitions on "golden parachutes" will not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements. In addition, credit unions would be permitted to appeal to the NCUA for a waiver which would allow an otherwise prohibited "golden parachute" under certain circumstances, such as in connection to a supervisory merger. Congress established the statutory basis for these rules in 1990, but the NCUA did not issue a proposed regulation on this issue at that time. The NCUA is also working on substantially identical rules for corporate credit unions, and NCUA board member Gigi Hyland said that a unified set of golden parachute prohibitions should be established once both sets of rules are adopted. The status of troubled credit unions was also addressed during the NCUA’s monthly report on the status of the NCUSIF and its Temporary Corporate Credit Union Stabilization Fund. During that presentation, NCUA Chief Financial Officer Mary Ann Woodson reported a slight increase in the number of CAMEL Code 4 and 5 credit unions, but noted a slight decrease in the percentage of total shares that are held in those troubled credit unions. According to Woodson, the .54 basis point decrease was due to an increase in total insured credit union shares as well as the positive progression of one credit union from CAMEL Code 4/5 status to CAMEL Code 3 status. The distribution of total assets in CAMEL code credit unions held relatively steady, Woodson added.

TIS regs low income definition budget changes OKd by NCUA

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ALEXANDRIA, Va. (7/30/10)--The National Credit Union Administration (NCUA) at its July open Board meeting officially adopted an interim final rule amending its Truth in Savings regulations to reflect recent clarifications that were made by the Federal Reserve (Fed). The Truth in Savings Act requires the NCUA to establish regulations substantially similar to those established by the Fed within 90 days of the effective date of the Fed’s rules. Specifically, the Fed earlier this year amended Regulations DD and E. Regulation DD addresses depository institutions' disclosure practices related to overdraft services, including balances disclosed to consumers through automated systems. Regulation E prohibits fees for overdrafts in connection with ATM and one-time debit card transactions, unless the consumer agrees or "opts-in" to these fees. The NCUA’s interim final rule will become effective 30 days after it is published in the Federal Register, but NCUA staffers said that the agency will accept comments for a 60 day period. The NCUA also made minor revisions to the technical definition of “low income members” during the meeting. The changes have no impact on the current operations of credit unions or the NCUA, according to staff. The agency’s budgetary outlook was also addressed during the open session of the meeting, with NCUA staff reporting that the NCUA reduced its total 2010 operating budget by $2 million. The NCUA estimated that $2 million in savings will be passed on to federal credit unions in the form of a reduced 2011 federal credit union operating fee. NCUA staff reported that the $2 million in net savings is drawn from $9 million in gross savings. However, those gross savings were offset by $7 million in new expenses, including funds that were spent on outside accounting consultants. Another expense accrued by the NCUA was an upcoming pro-credit union advertising campaign which will feature personal finance guru Suze Orman. The ad campaign, which will be waged via the online, broadcast, and print media, will tout the safety and soundness of credit unions, and remind both current and potential members that up to $250,000 of their deposits are fully insured by the National Credit Union Share Insurance Fund.

Inside Washington (07/29/2010)

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* WASHINGTON (7/30/10)--The House Financial Services Committee and its subcommittee on capital markets, insurance and government-sponsored enterprises (GSEs) announced Thursday that they will continue their series of hearings on the future of housing finance starting in September. The subcommittee, chaired by Rep. Paul Kanjorski (D-Pa.) will conduct an oversight hearing of the GSEs, and the full committee, headed by Rep. Barney Frank (D-Mass.), will continue its examination of policy options for restructuring the nation’s housing finance system. Kanjorski said in a release, “We also will examine the present policies related to calculating guarantee fees, including whether these charges are appropriately priced to cover risks and provide a reasonable return. Moreover, as our housing markets begin to stabilize, we will begin to consider innovative ideas for recovering the costs resulting from the decision to place Fannie Mae and Freddie Mac into conservatorship”… * WASHINGTON (7/30/10)--The House Financial Services Committee Wednesday approved two housing measures: H.R. 4868, the Housing Preservation and Tenant Protection Act of 2010 and H.R. 5814, the Public Housing Reinvestment and Tenant Protection Act. Both were approved in the same mark-up session as an Internet gambling bill the Credit Union National Association has been monitoring, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act (SEE RELATED: House committee approves Internet gambling legalization). H.R. 4868 aims to stem the loss of affordable rental housing nationwide and prevent the displacement of low-income tenants. H.R. 5814 aims to preserve the nation’s public housing program, which provides affordable rental housing for about three million Americans in 1.2 million households ... * WASHINGTON (7/30/10)--The Senate Banking Committee confirmed Janet Yellen as vice chairman of the Federal Reserve Board. Peter Diamond and Sarah Bloom Raskin also were nominated as governors of the board. The appointments now move to the full Senate for consideration (American Banker July 29).

CU testifies New interchange big blow to small institutions

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WASHINGTON (7/30/10)--Speaking before a House subcommittee on investigations and oversight hearing on the impact of interchange fees on small businesses, Clearview FCU’s vice president of lending Ron Celaschi said that “any reduction in interchange revenue” would deal a “serious blow” to his credit union and its members. Noting that the interchange provisions, which allow the Federal Reserve to intervene in the setting of interchange fees, were added to the recently enacted financial regulatory reform legislation without a full committee review, Celaschi urged Congress to repeal the interchange provisions “before the intended and unintended consequences of interchange regulation are realized.”
Rep. Jason Altmire (D-Pa.) meets Ron Celaschi before the vice president of lending for Clearview FCU, Moon Township, Pa., testifies before a House Small Business subcommittee Thursday on the how interchange fees affect small business. (CUNA photo)
“No appreciation was given to the consequences that the legislation would have on community financial institutions,” he added. Celaschi, who testified on his own behalf, detailed his Moon Township, Penn.-based credit union’s unique experience with interchange fees. While interchange fees provide a steady source of income for many large financial institutions, Celaschi said that his credit union runs it’s debit program “at a loss” because of the value that his members place on the program. Specifically, Celaschi said that while his credit union spends a total of $2.9 million to run its debit card program, it only brought in $1 million in interchange fee income during 2009, resulting in a $1.9 million funding gap. Any further reductions in interchange will force his credit union to impose fees on members to make up the lost revenue, a move that will undeniably harm the members, Celaschi added. Celaschi also took the opportunity to publicly back an increase in the statutory member business lending cap for credit unions to 27.5%, saying that doing such would allow credit unions to “be a part of the solution to the small business credit crisis.” He added that his own credit union, which currently lends an average of $70,000 to the small businesses that it works with, is “committed” to helping the small businesses in its community. The Credit Union National Association has fully analyzed the impact that the interchange provisions would have on credit unions. For that analysis, use the resource link. CUNA is also working with the Fed to ensure that rules that exempt financial institutions with under $10 billion in assets from the terms of the interchange legislation are closely followed.

Udall takes Senate floor on MBLs

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WASHINGTON (7/29/10)--Sen. Mark Udall (D-Colo.) on Wednesday again promoted legislation that would lift the current 12.25% cap on credit union member business lending ahead of a potential Senate vote on small business legislation. Udall’s new amendment, which was reintroduced on procedural grounds, is identical to earlier legislation that proposed lifting the current MBL cap to 27.5% of total assets. Speaking before the Senate on Wednesday, Udall said that his legislation was a “small step” to help small businesses at no cost to taxpayers. Udall added that he would work with senators from both sides of the aisle in hopes of gaining support for his “sensible reforms.” The Credit Union National Association (CUNA) has estimated that lifting the cap even to 25% of assets would inject about $10 billion in new funds into the economy and create more than 100,000 new jobs, at no cost to taxpayers. Udall during his remarks cited the effect that his legislation could have on currently tight credit markets, and estimated that lifting the cap could create $200 million in new small business funding in his state. The small business jobs bill may come up this week for a vote, though it is not known whether leading Senators can gather the votes needed to end debate. That legislation would provide small banks with $30 billion in funds to lend to small businesses. Udall, who supports the small business legislation, said that he did so with the understanding that if the Senate was “going to finance $30 billion to increase lending,” they would “at the very least” also move to “increase lending without costing taxpayers a dime.” Negotiations on which amendments could be potentially added to the small business legislation continued late yesterday, and the Senate will likely hold a vote on limiting debate and amendments later today. President Barack Obama on Wednesday urged the Senate to approve the jobs bill, which he said would cut taxes for small businesses and make more loans available. Obama this week encouraged members of Congress to approve the legislation before the House and Senate begin their respective summer recesses.

Inside Washington (07/28/2010)

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* ALEXANDRIA, Va. (7/29/10)--The National Credit Union Administration (NCUA) has posted the third of three explanatory tracks to help credit unions better understand the history and prevailing situation involving the nation’s corporate credit union system. Track 3 outlines steps NCUA has taken to help stabilize the corporate credit union system. A DVD with all three tracks will soon be sent for free to all federally insured credit unions. The presentations provide an overview of the corporate credit union crisis. Track 1 covers the history and services of corporate credit unions. Track 2 describes types of corporate credit union investments; how these investments were affected by financial market declines; and how problems with the investments affected corporates and threatened the entire credit union system ... * WASHINGTON (7/29/10)--The Community Development Financial Institutions (CDFI) Fund is seeking comments about the CDFI/Community Development Entities (CDE) Project Profile Web Form. The voluntary collection of narrative descriptions of projects financed by CDFI Fund provides more narrative information on impact and best practices associated with all of the CDFI Fund’s programs. The purpose is to more fully describe and record the innovative approaches CDFIs and community development entities use in revitalizing communities and serving families. The form may be found on the CDFI Fund’s website. The CDFI Fund proposes adding four more check boxes to reflect new programs it administers, and rewording or adding clarifying language to the narrative questions for easier comprehension. Comments are due by Sept. 27 ... * WASHINGTON (7/29/10)--Comments filed by more than 300 individuals making suggestions for the futures of Fannie Mae and Freddie Mac have a common theme, according to American Banker (July 28). The commonality is that the individuals who authored the letters cannot agree on how to handle the enterprises, the publication added. Some suggest eliminating Fannie and Freddie, nationalizing them, or creating a mortgage insurance fund to guarantee mortgage-backed securities. Others say the government-sponsored enterprises (GSEs) should return to the way they were before the economic crisis, or the government should create a covered bond market so banks can issue mortgage-backed debt to finance loans. The Obama administration is planning a conference Aug. 17 with industry groups, academics and consumer representatives to discuss a plan for the GSEs. The administration has said it wants to submit a plan to Congress by January. Fannie and Freddie were taken into conservatorship in September 2008 ... * WASHINGTON (7/29/10)--The Government Accountability Office (GAO) has launched a mobile version of its website to allow users to access the site on Blackberrys, iPhones, Droids and other devices. The site’s content is organized under three tabs. The first allows users to browse the latest GAO reports and testimonies; the second provides users with the agency’s legal decisions and opinions; and the third, entitled “In the Spotlight,” highlights especially timely GAO work. Website users also can search to quickly find specific GAO products. The mobile version of GAO’s website is automatically opened by visiting the same URL as GAO’s regular website, www.gao.gov, via a mobile device ...

NCUA today Truth in Savings operating budget on agenda

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ALEXANDRIA, Va. (7/29/10)—The National Credit Union Administration (NCUA) later today is expected to approve an interim final rule addressing the Truth in Savings Act. The interim final rule follows the July 6 enactment of the Federal Reserve’s Regulation DD, which addresses depository institutions' disclosure practices related to overdraft services, including balances disclosed to consumers through automated systems. The NCUA will also discuss a proposed rule on so-called golden parachutes and indemnification payments as well as interim final rules that address the definition of low income. The Credit Union National Association will also be monitoring the NCUA’s discussion of its upcoming operating budget, as this discussion could portend changes to the regional structure of the NCUA. Increases in funding could also indicate expansion of some NCUA offices or programs. The monthly insurance fund report and the financial status of credit unions in general will also be addressed. The NCUA will cover supervisory activities during a closed session, and another cosed board meeting is scheduled for Friday.

House committee approves Internet gambling legalization

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WASHINGTON (7/29/10)—H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, will move on to the full house after the House Financial Services Committee approved the legislation by a 41 to 21 vote margin on Wednesday. The legislation, which was introduced by committee head Barney Frank (D-Mass.), would allow the U.S. Treasury to license internet gambling operators and would permit approved operators to accept bets from U.S. citizens. Both Credit Union National Association (CUNA) President/CEO Bill Cheney and Discovery FCU President/CEO Ed Williams, who testified on behalf of CUNA, have spoken on the good that the gambling legislation could do for credit unions that are currently mired in the compliance burdens of the Unlawful Internet Gaming Enforcement Act (UIGEA). UIGEA, as currently constructed, requires credit unions and other financial institutions are required to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. While many transactions that are made with illegal gambling operators are blocked, the UIGEA regulations do result in a large number of false positives, creating issues for both credit union members and credit unions. H.R. 2267 would ease the compliance burdens by supplying a list of approved Internet gambling providers that financial institutions could use to help determine what transactions to validate. However, Cheney, in a letter sent to House members this week, also urged legislators to direct the Treasury and the Department of Justice to develop and maintain a list of illegal Internet gambling providers, as well as the list of licensed operators, to further reduce the compliance burden on credit unions and other financial institutions. It is not known when the gambling legislation will come up for debate or a full House vote.

New interchange issue creeps into subcommittee appropriations bill

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WASHIINGTON (7/29/10)--Sen. Susan Collins (R-Maine) today may offer an amendment to an appropriations bill with an interchange provision in an effort to mitigate the impact of the provision on credit unions and community banks. Collins expressed concern for credit unions earlier this week as the ranking Republican member of the Senate subcommittee that approved a funding package, which included a ban on payment card networks charging the federal government a credit card interchange rate higher than the lowest interchange rate available on the market. Collins noted at that time her intention to offer a substitute" amendment when the full Senate Appropriations Committee considers the measure today, and the Credit Union National Association (CUNA) is asking credit unions to contact members of the committee to express concern about further interchange regulation. “This legislation has a long path before enactment--and there is significant time to affect this legislative language. Nevertheless, we will not take this threat lightly and will work with Sen. Collins and other senators who have concerns about interchange regulation,” CUNA Senior Vice President of Legislative Affairs John Magill said Wednesday. The subcommittee, which added the interchange language to the funding bill, is chaired by Sen. Richard Durbin (D-Ill.), who drove the successful push to include government limits on interchange fees in the comprehensive financial services regulatory reform bill signed into law June 21. Prior to a final vote in Congress, CUNA called for credit union grassroots action against the government controls, which resulted in hundreds of credit union advocates making personal visit to lawmakers on Capitol Hill. CUNA’s call to action also spurred in excess of 600,000 emails and phone calls to lawmakers, urging their opposition to the interchange provision. The final law includes an exemption from the interchange limits that should cover all but the three largest credit unions. CUNA continues to advocate for credit unions on interchange by working closely with the Federal Reserve as that agency works to implement the new rules affecting debit card interchange fees. Also of interest to credit unions in the bill before the Appropriations Committee today are provisions that would set funding for the U.S. Treasury Department Community Development Financial Institutions (CDFI) Fund, and the National Credit Union Administration’s Community Development Revolving Loan Fund (CDRLF), and Central Liquidity Facility.

SAFE Act rules effective Oct. 1

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WASHINGTON (7/29/10)--The National Credit Union Administration (NCUA) and the other federal financial regulators have released the final rule implementing the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act and it is effective Oct. 1. Published in the Federal Register Wednesday, the SAFE Act final rule implements the new law that requires all residential loan originators that work for federally regulated financial institutions to register with a new Nationwide Mortgage Licensing System and Registry. The SAFE regulations require that credit unions and other financial institutions adopt policies to assure that their employees who originate residential mortgages provide the required information (such as fingerprints and employment history), obtain a unique identifying number, and register. However, compliance with the registration requirement is not required until 180 days after the agencies provide public notice that the registry is accepting initial registrations. Financial institutions that are covered under the SAFE Act are also required to adopt and implement written policies and procedures to ensure compliance with these the law’s requirements. The SAFE Act also requires lenders to tailor these policies to best meet the nature, size, complexity, and scope of their mortgage lending activities. Only bank and credit union employees are subject to the registration procedures. Others engaged in residential mortgage lending, including employees of credit union service organization (CUSOs), are subject to more extensive state licensing procedures that include not only registration and having a unique identifier number, but also periodic testing. The rules also apply to privately insured credit unions when certain conditions are met and agreements reached between the National Credit Union Administration and the state regulator. Otherwise, these privately insured credit unions will need to be registered and licensed under state law.

New chief economist named at NCUA

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ALEXANDRIA, Va. (7/28/10)--The National Credit Union Administration (NCUA) on Tuesday introduced its latest chief economist, John Worth. Worth, who took over as the NCUA’s Director of the Office of the Chief Economist on July 26, will monitor “international, national, and regional economic and financial market developments and trends,” the NCUA said. Worth will also take part in NCUA policy program development, the release added. In a statement accompanying the release, NCUA Chairman Debbie Matz said that Worth brings “a wide-range of governmental experience” to the position of chief economist. Prior to joining the NCUA, Worth served as policy research manager at the Federal Housing Finance Agency (FHFA). Worth has also held various positions in the U.S. Treasury. For the full NCUA release, use the resource link.

CUNA analyzes interchange rules impact

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WASHINGTON (7/28/10)--The Credit Union National Association (CUNA) has said that while credit unions with under $10 billion in assets are exempt from interchange regulations the Federal Reserve Board is writing, CUNA is particularly concerned that the law does not require the marketplace to accommodate higher fees for smaller issuers. CUNA has prepared a detailed review of the new interchange statutory provisions. The review focuses on provisions of the law as well as on concerns regarding the law and its implementation. The new interchange regulations, which are still in development will be the result of legislation that was added to recently enacted comprehensive financial regulatory reforms. The interchange law directs the Federal Reserve Board to write rules on interchange fees for debit card purchases, a move which CUNA and credit unions strongly opposed as the legislation was considered by the U.S. Congress. Though the new interchange law amends the existing Electronic Fund Transfer (EFT) Act by adding a new section, the interchange regulations will be implemented by the Federal Reserve, not the new Consumer Financial Protection Bureau, which will implement other laws, including other provisions of the EFT Act. The Fed will be required to consult with the National Credit Union Administration and other financial regulators, including the new Consumer Financial Protection Bureau, as it crafts the interchange regulations. According to CUNA's analysis, it is unclear whether the Fed’s rule will set the actual interchange rates or set standards for determining whether interchange fees are “reasonable and proportional” to an issuer's costs. There has been no definitive statement from any federal authorities on how interchange rates will be regulated. While CUNA is advocating two-tiered interchange fee system to accommodate credit unions, pressure from merchants to contain interchange fees will continue. It is also unclear to what extent and for how long networks will accommodate a two-tiered system, CUNA added. Even so, CUNA will be pursuing as favorable an outcome as possible from the Fed, with the assistance of CUNA's Interchange Working Group. As reported earlier in NewsNow, CUNA President/ CEO Bill Cheney met last week with House Financial Services Chairman Barney Frank (D-Mass.), who assured CUNA he would work with credit unions to head off unintended consequences of interchange regulation. The CUNA analysis also addresses certain prohibitions on exclusive arrangements, routing limits, and network fee regulations. The potential for merchants to provide certain discounts and to set transaction minimums for credit card purchases, as well as issues concerning merchant acceptance of debit and credit cards, are also covered in the CUNA analysis. For more information about the analysis, contact Eric Richard at erichard @cuna.com or Mary Dunn at mdunn@cuna.com. For the full report, use the resource link.

Cheney Gaming legislation reduces CU UIGEA burdens

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WASHINGTON (7/28/10)--Proposed online gambling legislation could reduce the burdens that the Unlawful Internet Gaming Enforcement Act (UIGEA) has imposed on credit unions, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a Tuesday letter to Reps. Barney Frank (D-Mass.) and Spencer Bachus (R-Ala.) H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, would allow the U.S. Treasury to license internet gambling operators and would permit approved operators to accept bets from U.S. citizens. The legislation was one of several bills that were scheduled to be discussed by the House Financial Services Committee during a Tuesday markup session. However, Frank, who chairs the committee, postponed consideration of some of the bills until today, presumably due to time constraints. Under UIGEA, credit unions and other financial institutions are required to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. While CUNA does not take a position on the legality of online gambling, Cheney said in the letter that CUNA supports Frank’s legislation, as it would reduce the unnecessary compliance burden imposed by UIGEA. Cheney also encouraged legislators to direct the Treasury and the Department of Justice to develop and maintain a list of illegal Internet gambling providers, as well as the list of licensed operators, to further reduce the compliance burden on credit unions and other financial institutions. The legislation should also mandate safe harbors for financial institutions that use both the lists of legal Internet gambling providers and illegal Internet gambling providers when determining whether a transaction should be blocked. “Such an approach would promote compliance for institutions by providing them a much greater level of certainty as to whether a transaction for a particular entity should be prevented,” Cheney said. If approved by the committee, the legislation will move on to the full House of Representatives for a vote.

MBLs are no-cost help to small biz Cheney tells Senate

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WASHINGTON (7/28/10)--In a Tuesday letter to Senate leader Harry Reid (D-Nev.), Credit Union National Association (CUNA) President/CEO Bill Cheney said that credit unions would be forced to oppose pending job-creation legislation if that legislation does not include greater authority for credit unions to make loans to businesses. Cheney said that the U.S. Congress “will have left unused critical resources that credit unions could provide small businesses at no cost to the taxpayers" if member business lending (MBL) language is not added to H.R. 5297, the Small Business Lending Fund Act. Cheney noted that there is "no good public policy" reason to justify leaving credit unions out of the bill. The MBL amendment proposed by Sen. Mark Udall (D-Colo.) would lift the current cap of 12.25% to 27.5% of total assets. “Credit unions have proven for years that they are capable of doing this type of lending safely and soundly,” Cheney said. CUNA has estimated that lifting the cap even to 25% of assets would inject about $10 billion in new funds into the economy and create more than 100,000 new jobs, at no cost to taxpayers. There has been significant support for lifting the MBL cap in the media. And the Obama administration backs the increase, with the U.S. Treasury offering its own plans for an MBL cap lift in recent weeks, which was the basis for much of the Udall amendment. The small business jobs bill may come up this week for a vote, though it is not known whether leading senators can gather the votes needed to end debate on the measure and call for a final vote. CUNA and Udall will continue to work to attach the MBL provisions as an amendment to the small business legislation if it remains a viable option. For the full letter, use the resource link.

Inside Washington (07/27/2010)

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* WASHINGTON (7/28/10)--The Senate Committee on Banking, Housing and Urban Affairs will meet today to consider the nominations of Janet L. Yellen as a member and vice chair of the Board of Governors of the Federal Reserve System; Peter A. Diamond and Sarah Bloom Raskin, as members of the Board of Governors of the Federal Reserve System; Osvaldo Luis Gratacós Munet of Puerto Rico as inspector general of Export-Import Bank; and Steve A. Linick as inspector general of the Federal Housing Finance Agency ... * WASHINGTON (7/28/10)--International bank regulators Monday noted that they have agreed on principles that will shape capital requirements and liquidity rules for banks in the future (American Banker July 27). The agreement is a revision of an earlier set of principles by the Basel Committee on Banking Supervision in December 2009. The principles address what banks can count toward Tier 1 capital. Significant minority holdings in other banks can count up to 10% of Tier 1 common, while mortgage servicing rights and deferred tax assets can also each count 10%. The committee also endorsed contingent capital, which converts debt into equity in certain conditions. Jean-Claude Trichet, president of the European Central Bank, said the agreement will provide stability to the banking system. The committee will now focus on a transition agreement to ensure the banking sector can support the economy recovery, he added. The World Council of Credit Unions (WOCCU) has advocated for the past several years that the Basel Committee recognize the credit union difference. This year, WOCCU met with members of the Basel Committee on Banking Supervision and the Financial Stability Board to address pending revisions to the Basel II capital accord (News Now April 1) ... * WASHINGTON (7/28/10)--House and Senate committees have approved appropriation bills for the Department of Housing and Urban Development that would extend a $729,750 conforming loan limit through September 2011 (American Banker July 27). Without the extension, the limit would drop to $625,500 at year-end. The loan limit is the maximum size of loans that Fannie Mae and Freddie Mac can purchase through September 2011 ...

CUs continue push for MBL support in Senate this week

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WASHINGTON (7/27/10)--The Credit Union National Association (CUNA) and sponsor Mark Udall (D-Colo.) continue to work to drive support for member business legislation ahead of potential action this week. Job-boosting small business legislation was discussed last week, with an amendment that would create a $30 billion lending fund for small banks being added on Thursday. It is not known if the MBL legislation, which would lift the MBL cap imposed on credit unions from the current 12.25% to 27.5% of total assets, will come up for discussion this week, and the potential for discussion on the small business bill is also unknown at this time. While the house will wrap up the first half of 2010 at the end of this week, the Senate will likely remain in session through August 6. Further action on small business legislation could take place at that time. The House schedule for the week includes discussion of supplemental funding bills and possible changes to funding for the department of Housing and Urban Development. A House Financial Services Committee markup on internet gambling legislation will also take place later today.

Corporate stabilization fund gets clean 2009 audit

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ALEXANDRIA, Va. (7/27/10)—The Temporary Corporate Credit Union Stabilization Fund (TCCUSF) received an unqualified or “clean” audit opinion with no deficiencies noted, according to an National Credit Union Administration (NCUA) announcement Monday. Citing a report from KPMG LLP, the independent firm retained to conduct the audit, the NCUA Chairman Debbie Matz said the audit results represent “an important validation of the soundness of this essential NCUA role.” “In these volatile and uncertain times, it is very positive and reassuring for credit unions that the Stabilization Fund, working in concert with other NCUA funds, has received this clean bill of health on its financial reporting and is well-positioned to safeguard the corporate system,” Matz said. Last month, KPGM also gave the National Credit Union Share Insurance Fund (NCUSIF) a "clean" audit report, with auditors also certifying the "financial accuracy" of the NCUA’s operating fund, its community development revolving loan fund, and its central liquidity facility. In its report on the TCCUSF, KPMG wrote, “(I)n our opinion, the financial statements referred to…present fairly, in all material respects, the financial position (of the fund) as of December 31, 2009, and its net costs, changes in net position, and budgetary resources for the period from May 20, 2009 (inception) to December 31, 2009 in conformity with U.S. generally accepted accounting principles.” The TCCUSF was created in May 2009 by the U.S. Congress to accrue corporate credit union system losses, and over time, to assess the credit union system for the recovery of such expenses. The fund has access to $6 billion in U.S. Treasury borrowing authority, which is shared with the NCUSIF. After reviewing the auditors report, Credit Union National Association Chief Economist Bill Hampel said that while the audited financial statements offer no new information, credit unions can find the fund’s unqualified audit reassuring. The projected total cost of the corporate stabilization effort remains approximately $7.5 billion, of which $1 billion is the previous capital injection into US Central, and $6.5 billion is the accounting cost of guaranteeing all credit union non-capital deposits in corporate credit unions, Hampel said. “These accounting costs are NCUA's estimates of the ultimate actual costs of corporate stabilization. After all is said and done, credit unions will have to pay the actual costs that are eventually incurred as a result of troubled assets held by some corporate credit unions. This year's 13.4 basis point assessment raised $1 billion toward the final cost. In the next three to four years, we'll learn more about what the actual costs will be,” Hampel said. He added that it would not be unlikely to see assessments in the neighborhood of 13 basis points for the next couple of years, followed by adjustments, either increases or decreases, in the last few years of the stabilization as actual losses become better known. Use the resource links below for more information.

Cheney to iBankratei CUs concerned that interchange cap works

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WASHINGTON (7/27/10)--President/CEO Bill Cheney continues to publicly highlight credit union concerns over recently enacted statutory provisions to regulate interchange fees and related issues, including in a recent article on bankrate.com. In the article, Cheney questioned whether a legislated interchange carve-out for credit unions with under $10 billion in assets would be truly effective. That carveout, which was avocated by CUNA, credit union leagues and credit unions, would apply to all but three credit unions. While it does appear that that carveout would benefit credit unions, Cheney said that he was unsure that large payment card companies would fully support a two-tier structure with separate sets of fee scales for larger and smaller institutions, respectively. Cheney added that smaller institutions such as credit unions could lose revenue due to the interchange changes, a circumstance that may force credit unions to increase member fees or reduce the amount of services they offer to those members. The bankrate.com story notes that the legislation will allow merchants to continue the practice of setting minimum payment amounts for credit card purchases, but that minimum may not exceed $10. The legislation wil also permit merchants to offer discounts for consumers that use preferred payment methods, the story added. The bankrate.com story also noted U.S. Government Accountability Office research which found that legislation that reduced interchange fees charged to merchants in Australia did not result in lower prices for consumers. The interchange legislation, which passed into law as part of a larger financial regulatory reform package, will allow the Federal Reserve to intervene in the setting of per-transaction swipe fees. CUNA, credit unions, and credit union leagues made thousands of individual contacts with legislators ahead of the regulatory reform vote, urging their legislators to oppose the interchange provisions. CUNA is communicating its own analysis on the interchange legislation to league and credit unions later this week, and will also be revisiting issues that it has already raised to Fed staff as well as flagging additional areas of concern in a letter to the Fed and other policymakers this week. For the full bankrate.com story, use the resource link.

UIGEA relief may see committee vote today

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WASHINGTON (7/27/10)—The House Financial Services Committee later today will discuss H.R. 2267, the Internet Gambling regulation, Consumer Protection, and Enforcement Act, during a markup session. Legislation to address medical debt, shareholder protections, housing, and bonds will also be discussed during the markup session, which will begin at 10 A.M. E.T. H.R. 2267, which would allow the U.S. Treasury to license internet gambling operators, permitting those operators to accept bets from U.S. citizens, was addressed during a public committee hearing last week. During that hearing, Discovery FCU President/CEO Ed Williams, appearing on behalf of the Credit Union National Association, urged legislators to strengthen the safe harbor rules contained in the current legislation, the Unlawful Internet Gambling Enforcement Act (UIGEA). Williams also spoke in support of the more recently proposed legislation, as H.R. 2267 would eliminate some of the compliance-related uncertainty that credit unions currently face under UIGEA. UIGEA regulations currently require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. The new legislation, which was proposed by committee head Rep. Barney Frank (D-Mass.), would create new rules for online gambling operators. One way that the legislation, if passed, would aid credit unions is by creating a list of approved gambling operators. This would ease the compliance burden placed on credit unions and other financial institutions and prevent financial institutions from having to do their own investigative work. Williams last week indicated that while the number of transactions that his credit union blocks due to UIGEA rules is "no more than a handful per month," the transaction blocking process does create a number of false positives that "should not have been blocked."

Inside Washington (07/26/2010)

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* WASHINGTON (7/27/10)--The Federal Reserve Board is seeking nominees for its Consumer Advisory Council. The council advises the Fed on its responsibilities under the Consumer Credit Protection Act and other consumer financial services matters. The group meets three times a year in Washington, D.C. Meetings are open to the public. The board plans to appoint up to 10 members for terms that will begin in January. Nominations are due Sept. 10. Alan Cameron, president/CEO of the Idaho Credit Union League, is a representative on the council. His term runs through 2010 ... * WASHINGTON (7/27/10)--Tax cuts for the wealthy, which were approved during former President George Bush’s term, should expire this year, according to Treasury Secretary Timothy Geithner. Geithner told ABC that cuts for individuals who make $250,000 a year or more should expire (The New York Times July 26). The change would affect roughly 3% of Americans, he said. Geithner said he didn’t think the cuts would affect economic growth. Some members of Congress disagree and say they would try to extend the cuts for people of all incomes. Supporters of extending the cuts, approved in 2001 and 2003, argue that raising the taxes on any income group could prohibit economic recovery, the newspaper said ... * WASHINGTON (7/27/10)--The Treasury Friday announced the continued sale of its holdings of Citigroup common stock, slated to end Sept. 30 regardless of whether all the shares are sold. Morgan Stanley, Treasury’s sales agent, will have discretionary authority to sell 1.5 billion shares of Citigroup common stock under certain parameters. Treasury received 7.7 billion shares of the stock last summer as part of the exchange offers conducted by Citigroup to strengthen its capital base. Treasury exchanged the $25 billion in preferred stock it received in connection with Citigroup’s participation in the Capital Purchase Program for common shares at a price of $3.25 per common share. Treasury currently owns about 5.1 billion shares of Citigroup common stock ...

Inside Washington (07/23/2010)

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* ALEXANDRIA, Va.(7/26/10)--Supervisory activities will be discussed at the National Credit Union Administration’s (NCUA) upcoming closed board meeting, which will take place on Friday at 9 a.m. ET. The NCUA will hold its monthly open meeting, with a closed meeting to follow, on Thursday. Another closed meeting was held last week … * WASHINGTON (7/26/10)--The Federal Deposit Insurance Corp. (FDIC) plans to disclose the individuals and groups that it met with regarding the regulatory reform bill, which was signed into law by President Barack Obama Wednesday. The plan moves beyond current disclosure policies and perceptions that banks will try to weaken provisions of the reform bill as regulators implement its provisions (American Banker July 23). Right now, agencies publish only records of meetings about proposed regulations during a comment period. However, FDIC Chairman Sheila Bair said July 15 that she would develop rulemakings in an transparent manner. The agency’s disclosure plan is similar to the Obama administration’s--the administration has published records of meetings it held with lobbyists about the Troubled Asset Relief Program and economic stimulus measures ... * WASHINGTON (7/26/10)--Recent reports by government and private analysts indicate that mortgage loan servicers are making more loan modifications on their own than through government programs, such as the $50 billion Home Affordable Modification Program (HAMP), which aims to lower borrowers’ mortgage payments for five years. This year, servicers completed more than 800,000 alternative modifications, while HAMP produced 389,198 (USA Today July 23). Several recent reports the newspaper cited indicate that newer modifications have better results, lower monthly payments reduce default rates, redefault rates on modified mortgages remain high and eligibility standards for HAMP modifications are not consistent or clear-cut. Diane Thompson, lawyer at the National Consumer Law Center, said that some of the alternative programs trigger concerns because the interest rates and payments aren’t as low as HAMP. Under HAMP, servicers must reduce mortgages to 31% of borrowers’ monthly incomes. If borrowers make payments for three months, the modified mortgage is good for five years. Some alternatives only help borrowers for a few months, the newspaper added ...

Online gambling regs up for markup this week

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WASHINGTON (7/26/10)--Rep. Barney Frank (D-Mass.) on Friday announced that his House Financial Services Committee will begin the process of marking up H.R. 2267, Internet Gambling Regulation, Consumer Protection, and Enforcement Act, on Tuesday. Discovery FCU President/CEO Ed Williams testified on behalf of the Credit Union National Association during a recent House committee hearing on H.R. 2267. During the hearing, which took place last Wednesday, Williams said that fully licensing and regulating online gambling portals used by U.S. citizens would eliminate some of the uncertainty that credit unions face regarding compliance with the Unlawful Internet Gambling Enforcement Act (UIGEA). UIGEA regulations currently require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. H.R. 2267, which was introduced last year by Frank, would give the U.S. Treasury the authority to license internet gambling operators to accept bets and wagers from U.S. citizens and to create regulations for those gambling operators. Frank's legislation currently has 69 co-sponsors. Williams said that while he supports H.R. 2267, regulators and legislators should strengthen the safe harbor rules contained in the current UIGEA rules. Legislation related to housing, medical debt relief, shareholder protection, and bonds will also be discussed by the committee.

CUNA seeks comment on FHA loan insurance changes

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WASHINGTON (7/26/10)--The Credit Union National Association (CUNA) has asked credit unions to comment on new credit score requirements imposed by the Department of Housing and Urban Development’s (HUD) proposed changes to Federal Housing Administration (FHA) loan insurance standards. The HUD proposal would alter the FHA’s credit score requirements, the level of seller concessions; and the standards for loans that are underwritten manually. HUD in a release said that these changes are aimed at preserving “both the historical role of the FHA in providing a home financing vehicle during periods of economic volatility and HUD’s social mission of helping underserved borrowers.” The proposal is also meant to strengthen the reserves of the fund that covers FHA losses, CUNA added. CUNA has specifically asked for credit unions for their comments on the proposed decrease in the maximum permitted seller concessions or the underwriting standards for manually underwritten loans. Comments are due to CUNA by Aug. 9. Comments to HUD should be submitted by Aug. 16. For the comment call, use the resource link.

Allow CUs to sell loans in secondary markets--CUNA to Treasury

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WASHINGTON (7/26/10)--Responding to a U.S. Treasury request for public input on the reform of the housing finance system, the Credit Union National Association (CUNA) has recommended that the Treasury’s pending housing finance plan “ensure that all segments of the financial services industry can take full advantage of the opportunities to sell their loans into the secondary market and to receive services from the Federal Home Loan Banks or other entities.” CUNA also urged the Treasury to “recognize that credit unions perform, and can continue to perform, a valuable role in the mortgage lending system” as it develops the new plan. The “overriding goal” of any new housing finance system should be “ensuring that consumers receive mortgage loans that they can afford,” CUNA added. The housing finance system should also minimize any legislative and regulatory burdens that credit unions may face, the letter said. Credit union burdens related to housing finance regulations are “very substantial,” and have escalated in recent years, CUNA added. CUNA plans to work with member credit unions in anticipation of the Obama Administration’s legislative proposal. For the full comment letter, use the resource link.

30B small biz fund added to jobs bill

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WASHINGTON (7/26/10)--The Senate by a 60 to 37 vote count late last week agreed to add back into a small business jobs bill a provision that would create a $30 billion fund to help small banks lend funds to small businesses. Similar legislation was dropped by Senate Democrats earlier in the week, but Sens. George LeMieux (R-Fla.) and Mary Landrieu (D-La.) presented the small business lending fund as an amendment on Thursday. That amendment, which passed with a mere two Republican votes from Sens. George Voinovich (R-Ohio) and LeMieux, also faced substantial procedural hurdles and was hampered by extensive political maneuvering prior to its passage. The Credit Union National Association (CUNA) and Sen. Mark Udall (D-Colo.) continue to work to add an amendment that would lift the member business lending (MBL) capacity of credit unions to 27.5% of total assets to the small business jobs bill. Udall discussed his amendment before the Senate earlier this month, saying that the legislation would "safely and soundly increase small business lending by credit unions without costing Americans a dime" and "could lead to large-scale job creation" in both his home district and nationwide. CUNA Senior Vice President of Legislative Affairs John Magill said that the prolonged debate over the small business legislation has allowed CUNA and credit unions to further solidify their argument for lifting the MBL cap. While it is not known if the MBL amendment will be added to the final Senate version of the small business legislation, CUNA President/CEO Bill Cheney continues to urge credit unions and credit union backers to encourage their legislators to support the legislation. Cheney last week also met with several legislators to discuss MBLs and other pressing credit union issues. CUNA has estimated that lifting the MBL cap to beyond 25% of total assets could create over 108,000 new jobs and inject $10 billion in new funds into the economy, providing needed relief to small businesses without costing taxpayers a dime.

CUNA reviewing NCUA merger PandA letter

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WASHINGTON (7/23/10)—The Credit Union National Association (CUNA) is encouraged by the National Credit Union Administration’s (NCUA) attempts to clarify the credit union merger process, and its Mergers Task Force is reviewing NCUA letter No. 10-CU-11 in detail. The NCUA’s guidance, which was provided in a July 2 letter to credit unions, provides a general overview on the merger process and details how and why the NCUA selects certain partners for assisted mergers or purchase and assumption (P&A) transactions. The guidance also covers the P&A process, types of mergers, and the criteria used to evaluate those mergers and P&As. The NCUA’s guidance came in response to credit union complaints. Credit unions have repeatedly asked the NCUA to provide greater transparency. CUNA’s Mergers Task Force, which was formed early this year, will monitor NCUA’s implementation going forward. For more extensive coverage of the NCUA’s merger and P&A processes, see the July 19 issue of NewsWatch.

Matz NCUSIF operating level should not drop far below 1.2

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ALEXANDRIA, Va. (7/23/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz on Thursday said that she does not support reducing the normal operating level of the National Credit Union Share Insurance Fund (NCUSIF) more than a few basis points below 1.2%. The Credit Union National Association (CUNA) does not support setting the normal operating level below 1.2% but has recommended that the NCUA set the operating level below 1.3%. Setting the operating level below 1.2% would tip the equity level too far towards 1%, CUNA has said. Reducing the amount held in the fund to below 1% of insured shares would trigger replenishment. The NCUA expects to levy an assessment to rebuild the equity level of the NCUSIF, the amount in the fund over the 1% of insured shares, later this year. CUNA Chief Economist Bill Hampel has estimated that this assessment could be somewhere between five and 10 basis points (bp), bringing the total amount assessed by the NCUA, including the 0.134% of insured shares assessed this month for the corporate credit union stabilization program, this year to between 18 and 23 bp of insured shares. Matz on Thursday said that credit union losses will be a “key factor” in determining the assessments required for the NCUSIF. “If credit union losses are lower, credit union assessments will be lower,” Matz added. For the NCUA release, use the resource link.

NCUA to discuss truth in savings operating budget at July open meeting

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ALEXANDRIA, Va. (7/23/10)— The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET next Thursday, will discuss a proposed rule on so-called golden parachutes and indemnification payments. Part 707 of NCUA's Rules and Regulations, Truth in Savings, are also on the docket. Changes to the Federal Reserve Board's Regulation DD, which implements the Truth in Savings Act, came into effect on July 6. Those changes addressed depository institutions' disclosure practices related to overdraft services, including balances disclosed to consumers through automated systems. The NCUA will also discuss interim final rules that address the definition of low income. The monthly insurance fund report, as well as the NCUA’s operating budget will also be addressed during the meeting. During the closed portion of the meeting, the NCUA will discuss supervisory activities. A separate closed meeting of the board is scheduled for the following Friday. For the full NCUA release, use the resource link.

Inside Washington (07/22/2010)

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* WASHINGTON (7/23/10)--In a farewell speech Wednesday, Comptroller of the Currency John Dugan suggested that regulators re-examine the regulatory regime of prompt corrective action (PCA). PCA proved valuable during stable economic times, but its record was “far less positive” during the past three years. “During this period, declining capital levels of banks--on which the PCA regime is fundamentally premised--lagged far behind the relatively sudden and large problems caused by troubled construction and development loans that precipitated failure,” Dugan said, noting that 45 national banks have failed since early 2008. All had capital amounts exceeding PCA requirements. But commercial real estate and other loan charge-offs that troubled the firms didn’t spike until 2009, when the institutions were closed. By then, regulatory intervention authorized under PCA was too late to avoid failures and losses, he said. Dugan, whose term ends Aug. 14, had a five-year tenure as comptroller ...

Cheney meets with Senate leader Reid

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WASHINGTON (7/22/10)—Credit Union National Association (CUNA) President/CEO Bill Cheney continued to press the case for credit unions in Congress, meeting with Senate leader Harry Reid (D-Nev.) and Sens. Spencer Bachus (R-Ala.), John Boehner (R-Ohio), Richard
Click to view larger image CUNA's Bill Cheney discusses credit union legislation pending in the Senate with Majority Leader Harry Reid (D-Nev.) during a meeting Wednesday in the leader's suite of offices in the U.S. Capitol. A key element of their discussion: credit union member business lending legislation. (CUNA Photo)
Click to view larger image House Minority Leader John Boehner, of Ohio, discusses the outlook for the congressional calendar with CUNA President/CEO Bill Cheney during a meeting Wednesday. (CUNA Photo)
Shelby (R-Ala.), Charles Schumer (D-N.Y.) and Patrick Leahy (D-Vt.) on Wednesday. As Senate Majority Leader, Reid is vital to any action the Senate takes, and is a central figure in the current debate over potential small business legislation. Reid is a cosponsor of Sen. Mark Udall’s pro-member business lending legislation. CUNA has estimated that lifting the MBL cap beyond the current limit of 12.25% could create over 108,000 new jobs and inject $10 billion in new funds into the economy, boosting the prospects for small businesses while removing taxpayer funds from the process. Cheney also continued to encourage the congressional leaders to consider allowing alternative capital for credit unions in this and upcoming congresses. The CUNA leader brought a similar message to their discussions with Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) on Tuesday. Cheney also met with the National Credit Union Administration’s Chairman Debbie Matz and board member Gigi Hyland on Tuesday, and intends to meet with board member Michael Fryzel in the near future. Cheney has also scheduled a meeting with U.S. Treasury Assistant Secretary for Financial Institutions Michael Barr in early August, and CUNA is working with the Treasury on alternative capital and interchange fee legislation.

CUNA testifies about UIGEAs continued burdens

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WASHINGTON (7/22/10)—Testifying on behalf of the Credit Union National Association, Discovery FCU President/CEO Ed Williams on Wednesday told the House Financial Services Committee that fully licensing and regulating online gambling portals used by U.S. citizens would eliminate some of the uncertainty that credit unions face regarding compliance with the Unlawful Internet Gambling Enforcement Act (UIGEA).
Click to view larger image CUNA's Bill Cheney thanks Ed Willams (right), CUNA board member and a witness for the association before the House Financial Services Committee on Wednesday, for delivering the association's viewpoint during a hearing on Internet gambling legislation. With Cheney and Willams are (from left) CUNA staffers Chris Gaginis, John Hildreth and Ryan Donovan. (CUNA Photo)
UIGEA regulations currently require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. In a prepared statement, Williams said that while the number of transactions that his credit union blocks due to UIGEA rules is “no more than a handful per month,” the transaction blocking process does create a number of false positives that “should not have been blocked.” Williams added that he supports H.R. 2267, which would give the U.S. Treasury the authority to license internet gambling operators to accept bets and wagers from U.S. citizens and to create regulations for those gambling operators. However, regardless of the status of that legislation, Williams said that regulators and legislators should strengthen the safe harbor rules contained in the current legislation. The Treasury and the Department of Justice should also develop and maintain their own lists of both legal and illegal internet gambling providers and provide safe harbors to financial institutions that use those lists when deciding which transactions should be blocked.

Obama signs historic financial reg reform

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WASHINGTON (7/22/10)—President Barack Obama on Wednesday officially signed legislation that introduces a series of sweeping regulatory reforms that substantially restructure financial regulations and provides consumers with new protections. The legislation is mainly aimed at Wall Street and larger financial firms and seeks to help avoid a repeat of the country's recent crisis prompted by a meltdown of housing and mortgage markets. The legislation also addresses thrifts, deposit insurance reforms, hedge funds, credit rating agencies, executive compensation, and investor protections, among other items. The legislation, which was officially approved by the Senate last week, makes permanent an increase in federal deposit insurance to $250,000 per account, and extends on an equal basis for credit unions and banks unlimited federal insurance for non-interest bearing accounts. The legislation also establishes a consumer financial protection bureau, and credit unions with assets under $10 billion will not be examined by the new bureau once it is established. A similar $10 billion credit union exclusion applies to rules that allow the Federal Reserve to set interchange fees for debit cards. The interchange legislation was strongly opposed by the Credit Union National Association (CUNA) and credit unions. A July 16 News Now story erroneously noted the provision applied to credit cards. The error has been corrected. (See CUNA: Final reg reform has some CU improvements, July 16) Several other reforms are also of interest to credit unions. One such reform is the inclusion of the National Credit Union Administration chairman on a proposed financial stability oversight council. CUNA continues to analyze the impact that the regulatory reform provisions will have on credit unions.

Inside Washington (07/21/2010)

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* WASHINGTON (7/22/10)--The Treasury Department’s Community Development Financial Institutions (CDFI) Fund will conduct a series of conference calls about CDFI certification. The calls will serve as a forum for potential certification applicants to ask questions. All calls will be held from 3 p.m. to 4 p.m. ET. The number is 202-927-2255. The calls are scheduled for Aug. 19, Sept. 16, Oct. 14 and Nov. 18. The CDFI Fund certifies organizations as CDFIs, which provide financing to low-wealth individuals. Credit unions are eligible to become CDFIs ... * WASHINGTON (7/22/10)--Under the regulatory reform bill, the Federal Reserve will no longer be required to defer to functional regulators when it wants to examine an entity such as broker-dealer or bank affiliate. The Fed’s new authority signals a major change in the approach to functional oversight, according to American Banker (July 21). The Gramm-Leach-Bliley Act of 1999 instructed the Fed to avoid subsidiaries regulated elsewhere and to defer questions about such subsidiaries to other regulators. Under the reform bill, the Fed can consult with “the appropriate regulator” with reasonable notice when it suspects trouble. For nonbanks, the Fed can recommend that the functional regulator of a subsidiary initiate a supervisory action. If an acceptable response is not given to the Fed within 60 days, it can take an enforcement action as if the subsidiary was supervised by the Fed. Fed officials have not indicated how the central bank would handle the new rules, but said they aim to get a broad view of the companies they monitor. Assessing risk of a holding company and its subsidiaries requires a comprehensive assessment of activities within the company, said Jon D. Greenlee, Fed associate director of banking supervision and regulation ... * WASHINGTON (7/22/10)--Regulators at a Tuesday hearing before a Senate Banking subcommittee stressed the need for foreign regulators to follow the U.S.’ financial reforms. Capital rules need to be enforced internationally to be effective in the U.S., said Lael Brainard, Treasury undersecretary of international affairs (American Banker July 21). Also, without internationally consistent standards, large financial firms will move their activities to jurisdictions with looser standards. This could create a “race to the bottom” and make systemic risk more problematic, she added. Federal Reserve Board Gov. Daniel Tarullo noted that the U.S. agrees with the Group of 20 regarding minimum capital requirements. But, it’s not practical to negotiate all of those details internationally and the U.S. should be flexible to adopt prudential regulations, he said. Regulators at the hearing largely appeared to support the reform bill, because its pieces are align with the G-20’s efforts ...

Bill of Rights for CUs is focus of CUNA exam subcommittee

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WASHINGTON (7/21/10)—The rights, as well as obligations, of a credit unions within the context of the examination and supervision process are being fully explored by the Credit Union National Association (CUNA). The CUNA examination and supervision subcommittee this week committed to reviewing CUNA's current policy regarding examinations, including the “Credit Union Bill of Rights,” CUNA developed to help ensure credit union leaders are aware of their obligations as well as their due process when supervisory issues arise. “Credit unions want to understand their obligations but also their rights of due process when they are involved in a supervisory action, ” said CUNA Deputy General Counsel Mary Dunn Tuesday. Dunn noted that while CUNA does not focus on individual supervisory cases, CUNA does pursue universal credit union concerns that may be presented by individual cases, such as issues that have arisen in California. She added that CUNA is a forming a working group under the auspices of the CUNA Examination and Supervision Subcommittee, chaired by Ohio League President Paul Mercer. "We want to work with all stakeholders on this endeavor, including credit unions, leagues, NCUA, and NASCUS to ensure credit unions are aware of the proper role and duties of the regulator as well as their own appropriate roles. The subcommittee set a goal to have strong and comprehensive report by early fall.

Four barred by NCUA from CU work

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ALEXANDRIA, Va. (7/21/10)--The National Credit Union Administration (NCUA) issued orders prohibiting the following individuals from participating in the affairs of any federally insured financial institution.
* Tiffany Churchill, a former employee of Maine Family FCU, Lewiston, was convicted of theft and subsequently sentenced to 18 months imprisonment, with all but 30 days suspended, and three years of supervised release. Churchill will also pay $15,352 in restitution; * Nathan Douglas Cranney, a former employee of Salt Lake City, Utah’s Deseret First FCU, without admitting or denying fault, signed an order of prohibition; * Lisa Zimmerman Dodson, a former employee of Tyler, Texas’s Cooperative Teachers CU, was convicted of theft and subsequently sentenced to five years of supervised release and 160 hours of community service. Dodson will also pay $69,655 in restitution; and * Richard Koenig, a former employee of Cudahy, Wisc.’s Prime Financial CU, without admitting or denying fault, signed an order of prohibition.
Violation of a 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 online.

CUNA to testify UIGEA remains unreasonable burden

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WASHINGTON (7/21/10)--Discovery FCU President/CEO Ed Williams later today will discuss the “inappropriate and unreasonable compliance burden” that the Unlawful Internet Gambling Enforcement Act (UIGEA) imposes on credit unions during a House Financial Services Committee hearing on H.R. 2267, the Internet Gambling Regulation, Consumer Protection and Enforcement Act. Williams is testifying on behalf of the Credit Union National Association (CUNA), and is the only finance industry representative that will speak during the hearing. UIGEA regulations currently require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. Williams, who’s Reading, Pa.-based credit union currently holds $130 million in assets from 10,500 members, will tell lawmakers that it is “unreasonable to assign the liability for policing internet gambling activity to depository institutions, many of which are small, without giving them the means necessary to determine which transactions are illegal.” CUNA has repeatedly stated that while it supports efforts to eliminate payments to unlawful Internet gambling businesses, the regulations imposed by the UIGEA are overly burdensome. CUNA notes that while regulators have attempted to make improvements in the rulemaking process, more work is needed. H.R. 2267, which was introduced last year by Rep. Barney Frank (D-Mass.), would give the U.S. Treasury the authority to license internet gambling operators to accept bets and wagers from U.S. citizens and to create regulations for those gambling operators. Frank’s legislation currently has 69 cosponsors. The hearing, which should be chaired by Committee Chairman Barney Frank (D-Mass.), will also feature testimony from the Commerce Casino’s Tom Malkasian, the Mohegan Tribe of Connecticut’s Tribal Chairwoman Lynn Malerba, terrorism/law enforcement consultant Michael Fagan, and professional poker player Annie Duke, who is testifying on behalf of the Poker Players Alliance. The hearing will take place at 2:00 P.M. E.T.

Inside Washington (07/20/2010)

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* WASHINGTON (7/21/10)--Witnesses have been named for a Senate Banking Committee hearing that was scheduled for Tuesday by its security, international trade and finance subcommittee on international cooperation in modernizing financial regulation. Witnesses include Federal Reserve Board Gov. Daniel Tarullo; Lael Brainard, Treasury undersecretary for international affairs; and Kathleen Casey, Securities and Exchange commissioner (American Banker July 20). Fed Reserve Board Chairman Ben Bernanke also is scheduled to appear today before the Senate Banking Committee to provide an update on monetary policy and economic performance ... * WASHINGTON (7/21/10)--Different agencies have different challenges, which have different kinds of responses, according to Comptroller of the Currency John Dugan. As “an exclusive supervisor-focused regulator on the commercial banks, we provided the kind of vocal leadership that we should have,” he told American Banker (July 20). Dugan, who will step down from his role Aug. 14 after a five-year term, reflected on his tenure at the Office of the Comptroller of the Currency (OCC). Dugan, often seen by some as a quiet, “behind-the-scenes operator,” the Banker said, noted that the OCC spoke its mind when it needed to. The agency was up front on nontraditional mortgages and commercial real estate guidance. It also was “outspoken” on several issues, he added ... * WASHINGTON (7/21/10)--The Federal Reserve Board Tuesday agreed Treasury that it was appropriate for the Treasury to reduce to $4.3 billion from $20 billion the credit protection provided for the Term Asset-Backed Securities Loan Facility (TALF) under the Troubled Asset Relief Program. The board authorized up to $200 billion in TALF loans, but when the program closed on June 30, there were $43 billion in loans outstanding. TALF was designed to increase credit availability and support economic activity, the Fed said ...

Cheney makes Hill NCUA rounds on CU issues

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WASHINGTON (7/21/10)—Credit Union National Association (CUNA) President/CEO Bill Cheney reached out to legislators and regulators on behalf of credit unions on Tuesday. Cheney first met with Rep. Barney Frank (D-Mass.), who serves as chairman of the House Financial Services Committee, and outgoing Sen. Chris Dodd (D-Conn.), who leads the Senate’s top financial services committee. In both meetings with the Senate and House committee leaders, Cheney emphasized the importance of alternative capital to credit unions and urged the congressional leaders to consider the issue in this and upcoming congresses.
Click to view larger image CUNA CEO Bill Cheney pumps up the prospects of credit unions’ pro-business, pro-growth MBL cap lift legislation during his discussion with Sen. Chris Dodd (D-Conn.)
CUNA has said that while the credit union system faces many issues, there is none more important for beleaguered credit unions than the issue of alternative capital. CUNA has steadily worked with the U.S. Treasury Department, all the while stressing the importance of credit union alternative capital authority. Cheney also stressed the importance of approving legislation that would lift the cap on member business lending (MBL) for credit unions to 27.5% of total assets. Member business lending legislation, which was recently introduced into the Senate by Mark Udall (D-Colo.), has been touted as a possible addition to a still-developing small business bill. The small business legislation could see a vote this week. Legislation that would have gifted small banks with $30 billion in government-backed funds to kick start their lending to small businesses was dropped by Senate democrats on Tuesday.
Click to view larger image Rep. Barney Frank (D-Mass.), a frequent credit union supporter, hears Cheney out as he outlines the many issues facing credit unions
CUNA has consistently backed lifting the MBL cap beyond the current limit of 12.25%, saying that doing such could create over 108,000 new jobs and inject $10 billion in new funds into the economy, at no cost to taxpayers. Cheney also lost no time in addressing credit union regulatory issues in separate meetings with National Credit Union Administration (NCUA) Chairman Debbie Matz and Board Member Gigi Hyland, along with senior agency staff. Cheney underscored CUNA’s continued willingness to work with the agency to achieve legislative victories for credit unions on such issues as increased member business lending authority and alternative capital for credit unions. CUNA commended NCUA for the improvements to its field of membership final rule and its new merger guidance, which CUNA had urged. The CUNA leader also addressed credit union examination and enforcement issues, as well as communication issues, and expressed credit union concerns regarding the proper funding of the allowance for loan and lease loss accounts (ALLL). Other topics raised with the regulators were NCUA's corporate credit union stabilization efforts, the timing of the highly anticipated corporate credit union rule, and dealing with “legacy " or undervalued assets held by the corporates. CUNA is following up with NCUA on all these matters. "I appreciated our meetings today, which I felt were beneficial,” Cheney said after the NCUA meetings. “There will always be some tension between the regulator, on the one hand, and regulated entities, such as credit unions, and their chief advocates, such as CUNA, on the other," Cheney observed. "We are in difficult times now and such times can magnify that tension.” He added, “One of my objectives as CUNA CEO is to work with the regulators when appropriate and to press for reasonable solutions when significant issues arise.” The new CUNA president/CEO has scheduled a meeting with U.S. Treasury Assistant Secretary for Financial Institutions Michael Barr in early August. He is also seeking a meeting time with the third NCUA board member, Michael Fryzel.

Inside Washington (07/19/2010)

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* WASHINGTON (7/20/10)--The Treasury Department is considering appointing board members to government-supported banks that are struggling to make dividend payments to taxpayers (American Banker July 19). The banks are participants in the Troubled Asset Relief Program. A Treasury spokesperson, Mark Paustenbach, told the Banker that the department is considering several options to protect taxpayers’ interests, including appointing board members... * WASHINGTON (7/20/10)--Although a proposed bank tax was stripped from the regulatory reform bill, President Barack Obama has indicated that he wants to push for the tax after reform is enacted. The tax would increase to $90 billion from $19 billion. Some policymakers originally did not support the tax as a part of reform, but others say the tax could garner enough support to pass as a separate measure, said American Banker (July 19). The tax “has a chance,” but it won’t be easy to pass, noted Karen Shaw Petrou, managing director at Federal Financial Analytics Inc. However, Scott Talbott, senior vice president at the Financial Services Roundtable, said that the need for such a tax is decreasing ... * WASHINGTON (7/20/10)--The Federal Reserve Board has released a list of names of the chairs and deputy chairs for each of the Federal Home Loan Banks. Each bank has a nine-member board of directors. The Fed appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair ...

CUNA preps for new reg reform rules

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WASHINGTON (7/20/10)—The Credit Union National Association (CUNA) continues to analyze the recently passed financial regulatory reform package, and CUNA is springing into action ahead of the expected signing of the reform package. CUNA’s interchange task force will reconvene later this week to discuss that portion of the legislation, and following CUNA’s discussions with Federal Reserve staff, the group will be providing detailed recommendations as the regulations are developed. While passage of the interchange provisions, which were attached to the larger financial regulatory reform package, was certainly a negative for credit unions overall, the legislation includes an exemption for debit card issuers with less than $10 billion in assets. Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, has stated that the terms of the exemption would be closely watched. CUNA remains concerned that while most credit unions will be exempt from the Fed’s interchange fee rules, they won’t be untouched by their total impact on the debit and credit markets. CUNA is also working to address the overall bill, and will continue to discuss issues with representatives from the Fed and the U.S. Treasury to help address credit union concerns. CUNA will also continue discussions with the Federal Reserve’s consumer protection division and will seek meetings with members of the Consumer Financial Protection Bureau once it is established under the regulatory reform legislation.

Feds semiannual monetary report tops hearings this week

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WASHINGTON (7/20/10)--Federal Reserve Chairman Ben Bernanke this week will deliver the semiannual monetary policy report to the Senate Banking Committee this Wednesday. The House Financial Services Committee will receive the same report on Thursday. Finance will also be discussed in the Senate on Tuesday as the banking committee’s subcommittee on security and international trade and finance discusses the oversight of international cooperation to modernize financial regulation. Closer to home, Discovery FCU’s President/CEO Ed Williams will testify on behalf of the Credit Union National Association as the House Financial Services Committee holds a hearing on H.R. 2267, the Internet Gambling Regulation, Consumer Protection and Enforcement Act. H.R. 2267, which was introduced by Rep. Barney Frank (D-Mass.), would give the U.S. Treasury the authority to license internet gambling operators to accept bets and wagers from U.S. citizens and to create regulations for those gambling operators. CUNA has said that while it supports efforts to eliminate payments to unlawful Internet gambling businesses, the regulations imposed by the Unlawful Internet Gambling Enforcement Act (UIGEA) are overly burdensome.

Gov. Duke calls for CRA review

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ARLINGTON, Va. (7/20/10)--Federal Reserve Governor Elizabeth Duke on Monday called for a comprehensive update of the Community Reinvestment Act (CRA). CRA was enacted in 1977 in response to a practice known as "redlining," which refers to the failure to lend to lower-income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose of the law is to ensure that for-profit financial institutions adequately meet the financial service needs of all parts of the communities from which they draw deposits. According to Dow Jones Newswires, panelists taking part in the discussion, which was one of four CRA hearings being held by the Fed, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision, recommended that CRA be broadened. The panelists also called for additional enforcement, and suggested that CRA rules also be applied to credit unions. The Credit Union National Association (CUNA) opposes any effort to include credit unions under CRA requirements. CUNA maintains that by their nature and mission of "people helping people," credit unions already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth. By virtue of their membership requirements, credit union products and services are offered within local communities and CRA requirements would add an unnecessary and costly regulatory burden to credit unions that already meet and exceed the intent behind CRA, CUNA has said.

MBLs could be front and center in Senate

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WASHINGTON (7/20/10)--The Senate resumed discussion of the small business lending bill on Monday, and Sen. Mark Udall (D-Colo.) still hopes that legislation that would lift the member business lending cap for credit unions to 27.5% of total assets can be added to that bill. The small business legislation would provide $30 billion in funds that small banks could then lend to small businesses. The Credit Union National Association (CUNA) is backing Udall’s amendment, and CUNA has also asked credit unions and credit union leagues to urge their senators to support the legislation. CUNA President/CEO Bill Cheney this week will meet with several key lawmakers to seek their support for the MBL provision. Udall’s legislation has the support of Democratic, Independent, and Republican senators, with Sen. Susan Collins (R-Maine) becoming the latest legislator to back the bill on Monday. CUNA’s Vice President of Legislative Affairs Ryan Donovan said that it is “vital” that the Senate version of MBL legislation has “the same level of bipartisan support that the House version of the bill has.” Similar legislation that was introduced in the House by Rep. Paul Kanjorski (D-Pa.) currently has 123 cosponsors, including 33 Republicans. CUNA has estimated that lifting the MBL cap, a move that has been endorsed by groups as disparate as the National Association of Manufacturers and Americans for Tax Reform, would create over 108,000 new jobs and inject over $10 billion in funding into the economy. The small business legislation and, potentially, Udall’s member business lending bill, is expected to be one of the many items on the docket this week, as the Senate recently completed its work on comprehensive financial regulatory reform.

CU execs New HMDA regs must be justified by govt

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ATLANTA, Ga. (7/19/10)—Credit union executives at a recent Federal Reserve hearing on the Home Mortgage Disclosure Act (HMDA) said that while they were not opposed to new HMDA reporting requirements, those requirements, if issued, must be justified. American Airlines FCU's Vice President and General Counsel Faith Anderson and State Employees CU Senior Vice President Phil Greer, both of whom were recommended by CUNA, testified at the Atlanta hearing. Anderson in a prepared statement added that her credit union supported changes to the HMDA requirements “provided that they further the goal of ensuring fair lending and anti-discriminatory practices.” However, Anderson said she was concerned that some proposed changes “would only serve to impose significant, additional compliance and reporting burdens.” Greer in his testimony added that HMDA reporting may at times indicate discriminatory practices that do not exist, and additional reporting may actually help to refute such concerns. The Credit Union National Association’s senior assistant general counsel Jeffrey Bloch said that most members of the panel, which included credit union and bank representatives as well as academics, regulators, and consumer groups, agreed that certain HMDA reporting requirements are generally not useful, such as information on loan preapprovals. Additional HMDA hearings will take place on Aug. 5 in San Francisco, Sept. 16 in Chicago, and Sept. 24 in Washington, D.C., and the input gathered in these hearings will be considered as new HMDA rules are developed. The new reporting requirements will be issued by the Consumer Financial Protection Bureau, which will be established under financial regulatory reform legislation that passed the Senate last week.

NCUA cautions CUs on home equity schemes

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ALEXANDRIA, Va. (7/19/10)--The National Credit Union Administration (NCUA) in a regulatory alert warned credit unions of potential red flags for home equity fraud schemes. The NCUA release, which mirrors a recent advisory from the Financial Crimes Enforcement Network (FinCEN), advises credit unions to specifically include the well-defined Home Equity Conversion Mortgage (HECM) program in the narrative portions of any relevant Suspicious Activity Reports (SARs) that are forwarded to authorities. According to the NCUA, potential criminals may use credit unions to receive, deposit or move funds as part of a HECM fraud scheme. Credit unions may be made aware of these scams through discussions with members who have become victims. If members become victims of these scams, credit unions should “include all information available for each party suspected of engaging in this fraudulent activity.” “This information should include the individual or company name, address, phone number, and any other identifying information,” the NCUA added. This type of extensive background information should also be provided by victims of the fraud schemes. Homeowners may be listed as suspects in the fraud if there is evidence that they participated in the fraud. For the full NCUA release, use the resource link.

Inside Washington (07/16/2010)

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* WASHINGTON (7/19/10)--The National Credit Union Administration (NCUA) announced minor and organizational changes in the maintenance and protection of the records it must keep that contain names of individuals. There is a 30-day comment period on the changes, as required by the federal Privacy Act of 1974. NCUA plans to implement the changes August 16 unless comments received warrant more revisions. NCUA has 17 categories of records covering not only employee records--such as security investigations, payroll and grievances--but also records covering Freedom of Information requests, consumer complaints, litigation and liquidated credit unions. NCUA’s notice contains an appendix explaining the standard uses of its records ... * WASHINGTON (7/19/10)--A “corrections” bill could be needed to clean up the financial regulatory reform bill, according to American Banker (July 16). The Senate approved the bill Thursday. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said last month that typically 2,000-page bills--like the regulatory reform bill--needs a corrections bill. The reform bill’s provisions are effective in a year, so there’s time to re-visit some things, he told reporters after the conference committee wrapped up last month. Rep. Barney Frank (D-Mass.) hinted that there may be some drafting errors, but acknowledged that those who worked on the regulatory reform bill did a complicated job well. He agreed a minor corrections bill would be needed ... * WASHINGTON (7/19/10)--Nominees to fill three seats on the Federal Reserve Board said the Fed made mistakes in the past and overlooked some threats alluding to the financial crisis. They also noted challenges the Fed will face when its powers are expanded under the regulatory reform bill, which the Senate approved Thursday. Janet Yellen, president of the Federal Reserve Bank of San Francisco and nominee to succeed Fed Vice Chair Donald Kohn, said the Fed and regulators should have acted earlier on the crisis. Sarah Bloom Raskin, Maryland commissioner of financial regulation, said the Fed should have noted the risks through its monetary policy responsibility (American Banker July 16). Peter Diamond, professor at the Massachusetts Institute of Technology, said the Fed has large responsibilities under the regulatory reform bill, and must step up to and use its new powers to serve “the greater good.” Under the reform bill, the Fed will conduct stress tests for systemically important companies, and implement the Volcker Rule, which will ban proprietary trading at banks ... * WASHINGTON (7/19/10)--The Commodity Futures Trading Commission (CFTC) is ready to draft financial reform regulations, the commission said Thursday at a conference (American Banker July 16). The commission plans to hold public meetings in September, and has assigned team leaders for 30 areas. It will be responsible for swaps--regulating swap dealers, commission merchants and swap data repositories ...

Flood insurance gets House vote for five-year extension

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WASHINGTON (7/19/10)—Congresswomen Maxine Water’s (D-Calif) legislation about ways to improve the National Flood Insurance Program (NFIP) was passed last week by the U.S. House. The bill reauthorizes the program for another five years, to Sept. 30, 2015, and improves the program by adding a Flood Insurance Advocate and also raising the maximum coverage limits. Waters said of her bill, “This legislation restores stability to NFIP, which it lacked while subject to lapses and only temporary extensions. During lapses in the flood insurance program over the past year, FEMA was not able to write new policies, renew expiring ones or increase coverage limits.” It was passed 329-90. Last month both the House and Senate passed legislation (H.R. 5569) to extend NFIP until Sept. 30, which was the most recent of several short-term extensions and which followed a one-month lapse of program authority during which new policies were not issued. Waters, in a press release, said the National Association of Mutual Insurance Companies estimated that 1200 homebuyers a day were unable to close on their homes while NFIP program was suspended. Next week the House is scheduled to take up H.R. 1264, the Multiple Peril Insurance Act of 2009. It amends the National Flood Insurance Act of 1968 to require the national flood insurance program to enable the purchase of multi-peril coverage and optional separate windstorm coverage.

NCUA warns CUs of environmental loan issues

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ALEXANDRIA, Va. (7/16/10)--National Credit Union Administration Chairman Debbie Matz on Thursday encouraged credit union lenders to “understand the implications” of Property Assessed Clean Energy (PACE) loan programs which could potentially “usurp a lender’s senior lien position on a mortgage, undermine the underwriting decisions made by the lender at the time of mortgage origination, and bypass consumer protections required prior to the extension of credit.” Matz recommended that credit union executives make “appropriate adjustments” to their credit union’s underwriting criteria and collateral monitoring practices in the event that the PACE loans available in their service areas present potential safety and soundness concerns. Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco also released a statement on Thursday, saying that the FHFA would “defend vigorously its actions that aim to protect taxpayers, lenders, Fannie Mae and Freddie Mac.” “Homeowners should not be placed at risk by programs that alter lien priorities and fail to operate with sound underwriting guidelines and consumer protections. Mortgage holders should not be forced to absorb new credit risks after they have already purchased or guaranteed a mortgage,” he added in a statement. The FHFA last week said that some energy retrofit lending programs, including those that are presented as PACE programs, represented “significant safety and soundness concerns.” As explained in The New York Times on July 1, the program works by having local governments issue bonds or borrow money that can then be used for home loans that cover the upfront costs of solar installations or other energy improvements. Homeowners who take part in these loans can then repay them over time through their property-tax bills. The PACE programs aim to ease the lending process for energy-saving property retrofitting projects, but can, according to the FHFA, "pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors." The FHFA has previously directed Fannie, Freddie and the Federal Home Loan Banks to waive their uniform security instrument prohibitions against senior liens and adjust their loan-to-value ratios, loan covenants, and borrower debt-to-income ratios to adapt to the needs of PACE program loans, and the Obama administration has tagged $150 million in stimulus money for the program. The U.S. Department of Energy is also working to expand the PACE program. The Credit Union National Association (CUNA) is also concerned by these energy loans, which can ultimately result in higher property tax bills and increased payments for borrowers, as well as corresponding risks for credit unions involved in the lending process. For the full NCUA and FHFA releases, use the resource links.

Inside Washington (07/15/2010)

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* WASHINGTON (7/16/10)--Now that the regulatory reform bill has passed, the Federal Reserve Board will have more power to assert systemic threats. Under the legislation, the Fed would write 54 rules and requirements for liquidity and risk-based capital. It also would conduct annual stress tests for systemically significant institutions, publish a results summary, implement the Volcker Rule and write rules that would require large financial firms to draw “living wills” (American Banker July 15). The Volcker rule bans proprietary trading and limits what commercial banks invest with private-equity and hedge funds ... * WASHINGTON (7/16/10)--The consumer financial protection bureau, included in the financial regulatory reform bill that passed Thursday, will have “a lot of teeth,” said Elizabeth Warren, who was a part of the Congressional Oversight Panel of the Troubled Asset Relief Program and is credited with coming up with the consumer financial protector regulator. The bureau will have the ability to reshape the consumer credit market, she said (American Banker July 15) ... * ALEXANDRIA, Va. (7/16/10)--The National Credit Union Administration (NCUA) on Thursday confirmed that it has formally terminated former Arrowhead CU CEO Larry Sharp, chief financial officer Daniel Marciante, senior vice president of lending Gene Shabinaw, and senior vice president of strategic development Ray Messler after the four executives were placed on administrative leave by the NCUA last month. Arrowhead CU, an $876 million asset credit union based in San Bernardino, Calif., was placed into conservatorship by the NCUA last month due to its declining financial condition. Following the June 25 announcement that the credit union was being placed into conservatorship, the NCUA named Kay Woods, a former CEO at Las Vegas-based Weststar CU, to serve as interim CEO of Arrowhead Central. Arrowhead Central continues to operate without interruption, the NCUA added in a release… * VIENNA, Va. (7/16/10)--The Financial Crimes Enforcement Network (FinCEN) has approved a 30-day extension to the comment period for a recently proposed revision to Bank Secrecy Act regulations applicable to money services businesses with regard to definitions of stored value and prepaid access. The new comment deadline is Aug. 27. The proposal would also delete the terms “issuer and redeemer” of stored value; impose suspicious activity reporting, customer information and transaction information recordkeeping requirements on both providers and sellers of prepaid access and, additionally, impose a registration requirement on providers only; and exempt certain categories of prepaid access products and services posing lower risks of money laundering and terrorist financing from certain requirements… * WASHINGTON (7/16/10)--The Office of the Comptroller of the Currency (OCC) has appointed Carolyn DuChene as deputy comptroller for operational risk policy. She will oversee all activities related to operational risk and bank information technology. She joined OCC in 1984 and works as assistant deputy controller in the Cleveland field office ...

CUNA Final reg reform has some CU improvements

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WASHINGTON (7/16/10)—Following the Senate's 60 to 39 vote approval of comprehensive financial regulatory reform legislation, Credit Union National Association President/CEO Bill Cheney said that credit unions would work with regulators to ease the impact that interchange provisions could have on their operations and members. The financial reform legislation includes provisions that will allow the Federal Reserve to intervene in the setting of debit card transaction fees. While the “extraordinary grassroots and lobbying efforts” of credit unions did not result in the removal of the interchange legislation, these efforts did help secure significant improvements to the provisions, Cheney said. One such improvement is a carveout that would exempt financial institutions with under $10 billion in assets from the interchange legislation. The improvements, “while certainly not a panacea,” will give credit unions “a better chance” to ensure that the rate set by the Federal Reserve accurately reflects the true costs of card programs for credit unions, Cheney said. CUNA will continue to address credit union concerns with the proposal in future discussions with the Fed, he added. Cheney noted that while much of the legislation is not aimed at, and does not affect, credit unions, the actions of CUNA, the leagues, and individual credit unions have also helped credit unions with under $10 billion in assets avoid the oversight, examination and enforcement of the Consumer Financial Protection Bureau. Credit unions also will not pay for the the funding of the consumer bureau, and the National Credit Union Administration will maintain a seat on that board. The legislation also addresses thrifts, deposit insurance reforms, hedge funds, credit rating agencies, executive compensation, and investor protections, among other items. CUNA will also work to "ensure that the consumer provisions extend the protections that are intended without limiting the benefit that credit unions already offer to their members," Cheney added. CUNA is currently planning a series of audio conferences to examine the provisions of this legislation that are of greatest concern to credit unions. Those audio conferences are set to take place in August.

House amendment would extend NFIP into 2015

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WASHINGTON (7/15/10)--The U.S. House Committee on Rules this week completed its markup of legislation that would extend the National flood Insurance Plan (NFIP) until Sept. 15, 2015. H.R. 5114, the Flood Insurance Reform Priorities Act of 2010, was introduced by Rep. Maxine Waters (D-Calif.) earlier this year. The legislation, as amended, also revises the priorities of the insurance program. It would require lenders to disclose in their estimates whether or not the real estate is located in an area that is subject to flood hazards and whether flood insurance coverage for residential real estate is available under the NFIP. Lenders must also notify the respective home purchasers of the need to contact the NFIP, and provide contact information for the NFIP. The Federal Emergency Management Agency's authority to extend flood insurance contracts under NFIP must be periodically reauthorized by Congress. While that authority has lapsed three times this year, an extension until Sept. 30 was approved earlier this month.

Inside Washington (07/14/2010)

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* WASHINGTON (7/15/10)--Rep. Dan Maffei’s (D-N.Y.) gift card bill, which will delay the effective date by which retailers must replace gift cards to make them compliant with new regulations in the Credit Card Accountability, Responsibility and Disclosures Act, passed the House Tuesday night. Maffei’s bill requires gift cards to be printed to reflect the CARD Act changes by Jan. 31 instead of the original August 2010 date. “Had retailers been required to destroy all gift cards in stock and reprint new cards by August 2010, they would have destroyed approximately 100 million cards, the equivalent of eight football fields filled 12 feet deep with plastic cards,” Maffei said. “By delaying the effective date until after the 2010 holiday season, we’re giving retailers a chance to clear out their stock while still protecting consumers with the new rules.” Retailers are required to inform consumers that they will not be charged dormancy fees and cards cannot expire, according to a statement on Maffei’s website ...

NCUA regulators urge fin. inst. to aid oil spill victims

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WASHINGTON (7/15/10)—Credit unions should work with their members and “consider measures to assist creditworthy borrowers” that have been affected by the environmental disaster caused by the ongoing oil spill in the Gulf of Mexico, the National Credit Union Administration (NCUA) said on Wednesday. The NCUA joined banking and thrift regulators, including the Federal Reserve Board and the Federal Deposit Insurance Corp., in stating their commitment to working with the financial services industry “to respond to issues that arise in the aftermath of the Gulf oil spill and to minimize disruption and the burden on banks and credit unions in affected areas.” Those agencies have directed their examiners to “consider the unusual circumstances of banks and credit unions in affected areas in determining the appropriate supervisory response to safety-and-soundness issues.” For the full release, use the resource link.

A third July NCUA closed meeting is scheduled

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WASHINGTON (7/15/10)—The National Credit Union Administration (NCUA) on Wednesday announced that it has scheduled a closed board meeting for July 21. According to an NCUA release, the board will discuss supervisory activities during the meeting. The meeting will take place at 9:00 am E.T. The NCUA has also scheduled a separate closed meeting for July 30, and will hold a closed session following its monthly open meeting on July 29. The NCUA has not released agendas for those meetings. For the full NCUA release on the July 21 meeting, use the resource link.

Sen. leaders hope small biz package moves forward soon

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WASHINGTON (7/15/10)—Senate leaders Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.) on Wednesday said that they were hopeful that the senate could move forward with a small business funding bill, which could include an amendment that would lift the member business lending cap to 27.5% of total assets, this week. Sen. Mark Udall (D-Colo.), who sponsored the MBL legislation and is looking to have it attached to legislation that would grant $30 billion in funds to small banks that could then lend it to small businesses, spoke on behalf of his MBL bill on Tuesday.


In his remarks, Udall said that his legislation would “safely and soundly increase small business lending by credit unions without costing Americans a dime” and “could lead to large-scale job creation” in both his home district and nationwide. Udall gained another co-sponsor following those remarks, with Sen. Al Franken (D-Minn.) on Wednesday joining Sens. Reid, Charles Schumer (D-N.Y.), Joe Lieberman (I-Ct.), Barbara Boxer (D-Calif.), Kirsten Gillibrand (D-N.Y.), Bernard Sanders (I-Vt.) and Daniel Inouye (D-Hawaii) as backers of the pro-MBL legislation. Udall’s MBL cap increase legislation mirrors legislative language sent to federal lawmakers by the U.S. Treasury earlier this year, and is backed by the Obama administration as well. National Credit Union Administration (NCUA) Chairman Debbie Matz has also backed the MBL cap lift in recent days. The Credit Union National Association (CUNA) and credit unions have led a sustained grassroots push for MBL legislation, and have amplified their efforts to garner bipartisan support for the Udall provision.

Inside Washington (07/13/2010)

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* WASHINGTON (7/14/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said Tuesday he secured the 60 votes he needs to pass financial reform in the Senate, with Sen. Olympia Snowe (R-Maine) agreeing to support the measure. The House approved the legislation last month (American Banker July 13). Dodd commended the three Republicans who agreed to support the bill--Snowe, Susan Collins (R-Maine) and Scott Brown (R-Mass.) ... * WASHINGTON (7/14/10)--Federal Reserve Board Chairman Ben Bernanke has called on banks to help small business owners obtain credit. Lenders should do all they can to help creditworthy borrowers, Bernanke said Monday at a small-business lending conference. He noted a series of meetings conducted by the Fed to gain perspectives on lending from small business owners, and said solving the issues faced by small businesses will require collaboration. Some concerns noted by businesses include the declining value of real estate and other collateral securing their loans, and the fact that current lending conditions don't represent credit tightening as much as a return to more traditional underwriting standards following a period of too-lax standards, Bernanke said. “Making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges,” he added ... * WASHINGTON (7/14/10)--The Federal Reserve Board yesterday released the results of the inaugural Senior Credit Officer Opinion Survey on Dealer Financing Terms (SCOOS), a quarterly survey providing information about the availability and terms of credit in securities financing and over-the counter (OTC) derivatives markets. Overall, the responses to the questions dealing with OTC derivatives trades suggested little change over the past three months in terms for plain vanilla and customized derivatives. SCOOS is modeled after the long-established Senior Loan Officer Opinion Survey on Bank Lending Practices, which provides qualitative information about changes in supply and demand for loans to households and businesses at commercial banks ...

Winning young members A iHuff Posti topic

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WASHINGTON (7/14/10)—Rob Rubin, the Huffington Post creator of FindaBetterBank.com, a tool to drive consumers to find “the best-fit” credit union or bank for their checking needs, has some advice to credit unions. The Post is behind the huge and hugely popular “Move Your Money Campaign,” which it began in January urging fed-up big bank customers—tired of high fees, run-arounds and bailouts--to put their money into credit unions or community banks. Rubin notes a concern, however, that credit unions are not doing enough with the opportunities the current climate is affording them for membership growth—at least not in the area of attracting young members. “The financial crisis and the attention given to the greed and hubris of big banks has created a window of opportunity for smaller institutions to win some customers - especially younger consumers who aren't heavily invested with a bank. But most credit unions are blowing it because they're not winning this younger set,” Rubin blogged this week. It’s a topic that comes up in credit union circles a lot—how to attract younger members, as well as younger officers in a work-world dominated by graying heads. In fact, at the Credit Union National Association’s “The 1 Conference” being held in Las Vegas this week, the topic is hot. For instance speaker Jim Collins, author of the best-selling book Good to Great: Why Some Coampanies Make the Leap…And Others Don’t, called the challenge to attract young members one of the “brutal facts” that face credit unions today. Rattling through some Filene Institution 2005 study numbers that are quite well known in the credit unions movement, Rubin noted in his blog posting: Only 6% of credit union board members were under 40; more than 42% were over 60; and average age of a credit union member was 47, nearly 10 years older than the median age of people in the US. “This older average age means many of their members are past their prime borrowing years. Importantly, over 27% of the US population is under 20 (Source: US Census),” Rubin wrote. So what does Rubin suggest? Here’s his to-do list for credit unions, in his words:
* Make appealing to younger consumers a primary part of your mission -- even if it alienates some of your older members; * Update your websites (seriously, most are horrible): * Offer features that younger consumers want--for example, mobile banking, ATM fee rebates, remote deposit, expedited bill payment, online chat for customer service, online account opening; * Start "socializing" online. Yes, many credit unions have Twitter accounts and Facebook pages, but most of those are used to broadcast information. Have 2-way conversations; and * Reach people who use the Internet to do research. People can be drawn to you from other online resources (like FindABetterBank ).
“Signing younger consumers up as members is essential for credit unions to survive. Therefore, failing to recognize that a coherent online strategy is mission-critical does not serve the long-term needs of your membership. That's my 2-cents, Rubin concludes.

FedACH SameDay Service CUNA analysis

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WASHINGTON (7/14/10)—In just a couple of weeks, credit unions and other depository institutions can use a new Federal Reserve same-day automated clearing house (ACH) service, but they must opt-in to participate. In a new final rule analysis, the Credit Union National Association (CUNA) reminds credit unions that the new service goes into effect Aug. 2. To opt-in, depository institutions must execute a participation agreement with the Fed. CUNA notes that credit unions that opt-in may choose the extent of their participation and indicate whether they wish to:
* Send only; * Receive only; or * Send and receive same-day debit items.
CUNA notes that same-day settlement is limited to transactions that arise from consumer checks converted to ACH and consumer debit transfers initiated over the Internet and phone. Specifically, the “FedACH SameDay” service only applies to origination of non-government debit payments and includes only Accounts Receivable Entry (ARC), Back Office Conversion Entry (BOC), Point-of-Purchase Entry (POP), Telephone-Initiated Entry (TEL), Represented Check Entry (RCK), and Internet-Initiated Entry (WEB). The transmission deadlines and settlement times for the FedACH SameDay service are as follows: For "forward same-day debit transfers," the transmission deadline to FedACH is 2:00 pm EST and the posting time is 5:00 pm EST; for "return same-day debit transfers," the transmission deadline to FedACH is 4:30 pm EST and the posting time is 5:30 pm EST. Use the resource link below for more CUNA analysis of the Fed rule.

Keep up grassroots on CU issues says Cheney

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WASHINGTON (7/14/10)-With the U.S. Senate seemingly poised on the brink for votes on key bills for credit unions, Credit Union National Association (CUNA) President/CEO Bill Cheney urged credit union Tuesday to keep up their grassroots action. The Senate has on its near-term agenda a final vote on H.R. 4173, the Wall Street Reform and Consumer Protection Act, and a vote on the Small Business Lending Fund Act (H.R. 5297). (See related story: NCUA strongly endorses increased MBL authority) Regarding the Small Business Lending Fund Act, Sen. Mark Udall (D-Colo.) has introduced an amendment that would increase the credit union member business lending (MBL) cap to 27.5% of total assets, up from the current 12.25%. CUNA and credit unions have worked in support of this change, which CUNA notes could add $10 billion in credit for the country’s struggling small businesses and add more than 100,000 new jobs—at no cost to taxpayers. CUNA and credit unions oppose H.R. 4173, the regulatory reform bill, because it includes an interchange provision that allows the government to set the cost of interchange fees, a rule change that CUNA argues will harm both credit unions and their members. “Credit union voices must continue to be heard on Capitol Hill about these important pieces of legislation as they move toward a vote in the Senate,” Cheney said and urged credit unions to light up the Capitol switchboard (202-224-3121) to reach their senators.

As vote nears Udall NCUA strongly endorse increased MBL authority

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WASHINGTON (7/14/10)--Mentioning the support of the Credit Union National Association (CUNA) among others, Sen. Mark Udall (D-Colo.) took the Senate floor last evening to speak on behalf of his measure that would raise the credit union member business lending (MBL) cap to 27.5%, up from 12.25%. Udall has drafted the language as an amendment to The Small Business Lending Fund Act, which is now up for a Senate vote. The MBL cap increase is backed by the Obama administration, and the Udall amendment reflects legislative language sent to federal lawmakers by the U.S. Treasury earlier this year. CUNA President/CEO Bill Cheney said after Udall's remarks, “Our sincere thanks to Sen. Udall for bringing this important issue before the Senate today and particularly for his passionate support of helping credit unions play a role--at no cost to taxpayers--in increasing jobs during this economic recovery.” Cheney added, “The legislation he spoke of today would create more than 100,000 new jobs, and inject $10 billion into the economy, in the first year, just by increasing the capacity of credit unions to make business loans. In making the point that this amendment is about helping small businesses, Sen. Udall spoke about two Coloradans who have received credit union financing to start their small businesses; small businesses that are thriving today. "We are also very grateful for his comments about CUNA and credit unions generally. We urge all senators to support the Udall amendment to the small business jobs bill." Earlier Tuesday, the National Credit Union Administration (NCUA) urged the U.S. Congress to pass a zero-cost “stimulus for America’s small businesses” by increasing the statutory limit on credit union MBLs. “There has never been a better time, or a better opportunity, to move the economy forward," said Chairman Debbie Matz in a release. “Congress now has an opportunity to increase the ability of credit unions to lend to small businesses, and in doing so empower credit union members to create more jobs and spur economic growth. “Credit union member business lending, when done in a safe and prudent manner that includes appropriate regulatory safeguards, can be of significant benefit to a small business community that is too often limited in their access to credit,” Matz said in her call to action on MBL legislation. The Senate was expected to resume work yesterday on the Small Business Lending Fund Act (H.R. 5297) and begin voting on possible amendments. Sen. Udall has introduced the amendment to increase the credit union MBL cap to 27.5% of total assets, up from the current 12.25%. CUNA and credit unions have led a sustained grassroots push for MBL legislation, and have amplified their efforts to garner bipartisan support for the Udall provision in advance of a vote. Cheney urged credit union advocates to continue to light up the switchboard (202-224-3121) at the U.S. Capitol to contact senators to urge them to support the Udall amendment. (See related story: Keep up grassroots on CU issues, says Cheney) H.R. 5297 also is the bill that would allocate $30 billion for community banks to try to stimulate increase lending by those institutions to small businesses. CUNA has underscored that an MBL increase would carry no cost to taxpayers, but could infuse $10 billion of credit into small business and create more than 100,000 jobs.

Busy Senate could see vote on key bills

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WASHINGTON (7/13/10)—The U.S. Congress returned to session this week after its Independence Day District Work Period, and the action credit unions will want to watch is mostly concentrated in a busy Senate schedule. The Senate, reconvening yesterday afternoon to take up judicial nominations, also has on its agenda a final vote on H.R. 4173, the Wall Street Reform and Consumer Protection Act, and a vote on the Small Business Lending Fund Act (H.R. 5297). Each bill has its hot-button topic for credit unions. H.R. 4173, the comprehensive financial regulatory reform package, includes a provision requiring government price setting for interchange fees, which is strongly opposed by the Credit Union national Association (CUNA). And Sen. Mark Udall (D-Colo.) has introduced an amendment for The Small Business Lending Fund Act that would increase the credit union member business lending (MBL) cap to 27.5% of total assets, up from the current 12.25%. CUNA President/CEO Bill Cheney has underscored the urgency of continued credit union grassroots action on both bills. Cheney urges credit unions to continue to encourage their senators to back the increased MBL cap. He also urges continued opposition to the interchange provision, the inclusion of which in the regulatory reform bill has forced CUNA’s opposition to the package. Also on the Senate agenda this week is a vote on a supplemental appropriations bill, so while a vote is expected on H.R. 4173 late this week, it is also possible—and perhaps likely—that the Senate will not complete action on all of these bills this week. And a hearing of note this week: the Senate Banking Committee will conduct a nomination hearing for Janet Yellen to be a member and vice chair of the Federal Reserve Board, as well as for Peter Diamond and Sarah Bloom Raskin to be members of the Fed Board. The House has a lighter schedule this week. Of interest to credit unions:
* Consideration of the Flood Insurance Reform Priorities Act (H.R. 5114), which, as the name implies, would re-order the priorities of the program, and also provide a five-year extension of the National Flood Insurance Program. The programs most recent temporary extension lapses on Sept. 30.

FinCEN says reporting change brought CTR filing decrease

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VIENNA, Va, (7/13/10)—A new report describes the impact of a new Bank Secrecy Act (BSA) rule that was intended to simplify the process by which credit unions and other financial institutions can exempt the transactions of certain accountholders from a requirement to report transactions in currency in excess of $10,000. The Financial Crimes Enforcement Network (FinCEN) says in its new report that the rule, which went into effect 18 months ago on Jan. 5, 2009, has had a positive impact on reducing the cost of the exemption process to depository institutions by eliminating the need to file “designation of exempt persons,” or DOEP, for certain members or customers. FinCEN also claims the rule has enhanced the value and usefulness of the remaining currency transaction report (CTR) filings for law enforcement investigative purposes by removing filings that FinCEN says had little or no value to that effort. The changes to the filing rule, FinCEN said, resulted 12% drop in CTRs in 2009, to 13.7 million, and in a 44% drop in the number of exemption filings—to an all-time low of 29,000. FinCEN said CTR filings declined by 13.6% at the smallest institutions and by 20% at the largest ones. Use the resource link below to read more.

Inside Washington (07/12/2010)

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* WASHINGTON (7/13/10)--The Federal Housing Finance Agency (FHFA) is proposing a regulation that would create a new framework for conservatorship and receivership operations for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corp., and the Federal Home Loan Banks, as contemplated by the Housing and Economic Recovery Act of 2008, according to a document published in The Federal Register (July 9). The proposed rule will implement the provision, Authority over Critically Undercapitalized Regulated Entities, and is designed to ensure that the conservatorship and receivership operations advance FHFA’s critical safety and soundness and mission requirements. The rule also seeks to protect the public interest in increasing the transparency of conservatorship and receivership operations for Fannie Mae and Freddie Mac ... * WASHINGTON (7/13/10)--The Federal Deposit Insurance Corp. (FDIC) board voted Monday to revise a memorandum of understanding with primary federal banking regulators to enhance FDIC’s existing backup authorities over insured depository institutions the FDIC does not directly supervise. The agreement will improve FDIC’s ability to access information to understand its exposure to insured depository institutions. Specifically, the memorandum gives FDIC backup supervision authority under an expanded list of circumstances, including when the insurance pricing system suggests an insured depository institution might be at higher risk, when institutions are defined as “large” under international regulatory guidelines or when large, interconnected bank holding companies are defined as systemic by financial reform legislation pending in Congress ...

NEW NCUA strongly endorses increased MBL authority

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ALEXANDRIA, Va. (UPDATE 7/13/10, 11:15 a.m ET)—The National Credit Union Administration (NCUA) today urged the U.S. Congress to pass a zero-cost “stimulus for America’s small businesses” by increasing the statutory limit on credit union member business lending. “There has never been a better time, or a better opportunity, to move the economy forward," said Chairman Debbie Matz in a release. “Congress now has an opportunity to increase the ability of credit unions to lend to small businesses, and in doing so empower credit union members to create more jobs and spur economic growth. “Credit union member business lending, when done in a safe and prudent manner that includes appropriate regulatory safeguards, can be of significant benefit to a small business community that is too often limited in their access to credit,” Matz said in her call to action on MBL legislation. The U.S. Senate is expected to resume work today on the Small Business Lending Fund Act (H.R. 5297) and begin voting on possible amendments. Sen. Mark Udall (D-Colo.) has introduced an amendment to increase the credit union MBL cap to 27.5% of total assets, up from the current 12.25%. The Credit Union National Association (CUNA) and credit unions have led a sustained grassroots push for MBL legislation, and have amplified their efforts to garner bipartisan support for the Udall provision in advance of a vote. H.R. 5297 is the bill that would allocate $30 billion for community banks to try to stimulate increase lending by those institutions to small businesses. CUNA has underscored that an MBL increase would carry no cost to taxpayers, but could infuse $10 billion of credit into small business and create more than 100,000 jobs.

CUNA urges Meet returning lawmakers with MBL push

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WASHINGTON (7/12/10)—WASHINGTON (7/12/10)—Credit Union National Association (CUNA) President/CEO Bill Cheney on Friday continued to underscore the urgency of credit unions continuing to make grassroots contacts and to encourage their senators to back legislation that would lift the member business lending (MBL) cap for credit unions. Cheney noted that Congress returns to session this week after a July 4th District Work Break and has only until Aug. 9 before the next district break. He called the next weeks a “critical juncture” for the MBL cap provision and other legislation of interest to credit unions. “Credit unions can add as much a $10 billion in credit for small businesses and 108,000 new jobs—at no cost to taxpayers—if the MBL cap is lifted even just to 25% of total assets. Now is an important time for credit unions to continue make clear to federal lawmakers how the country benefits if this artificial cap—an arbitrary 12.25%--is lifted,” Cheney said. The MBL fight was also taken to home districts over the recently completed work period, with representatives from state leagues and credit unions meeting with their legislators in home offices and public forums. CUNA will continue to make the case for increased MBL authority as the Congress returns to session. Credit union backers are specifically supporting Sen. Mark Udall’s (D-Colo.) amendment to raise the cap to 27.5% of a credit union’s assets. Udall’s provision could be added to a bill that is intended to stimulate more credit for small businesses, and CUNA is urging credit unions to garner senators’ support for the addition to the bill. That bill also proposes to provide community banks provide an extra $30 billion to lend to small businesses through a government-backed, taxpayer-covered lending fund. Another focus of CUNA’s grassroots call-to-action is continued opposition to a provision in the comprehensive financial regulatory relief package, passed by the House and awaiting a Senate vote, that would require the Federal Reserve to set interchange fees. CUNA has opposed the overall reform package because of concerns about the harmful impact that government price-setting of interchange fees would have on credit unions and their members.

Inside Washington (07/09/2010)

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* WASHINGTON (7/12/10)-- Troubled firms won’t be given a second chance--“we will dismember them,” said Treasury Secretary Timothy Geithner to National Public Radio (July 9). The regulatory reform bill would give the government new power to wind down failing firms. However, economists have questioned if the firms would be allowed to fail or if the government would bail them out. He said regulators would force banks to hold more capital to decrease risk so they don’t take on too many loans ... * WASHINGTON (7/12/10)--West Virginia Attorney General Darrell V. McGraw Jr. has said that state Gov. Joe Manchin III can call for a special election in November to fill a vacancy in the Senate created by the death of Sen. Robert Byrd (D-W.Va.). Manchin said he preferred an election to appointing someone to serve through 2012 (The New York Times July 8). Manchin is expected to appoint someone to fill the seat until November. Byrd’s death leaves Democrats two votes shy of passing the Senate version of the regulatory reform bill ... * WASHINGTON (7/12/10)--The fight over Fannie Mae and Freddie Mac’s futures will likely be bigger than the one ensuing over the passage of regulatory reform legislation, said American Banker (July 9). Republicans have criticized the regulatory reform bill because it does not address the enterprises. Democrats have not taken any action to develop a plan for Fannie and Freddie, which are in conservatorship. Last month, Treasury Secretary Timothy Geithner told the Troubled Asset Relief Program Congressional Oversight Panel that the Obama administration plans to release some housing reforms in early 2011. The plans require “fundamental” changes of the enterprises, Geithner said. Banker noted that “most analysts” predict a major housing policy overhaul won’t take place for at least another five years ... * WASHINGTON (7/12/10)--First Lady Michelle Obama noted the importance of several Treasury programs, including the Community Development Financial Institutions (CDFI) Fund, during a speech to the Treasury Wednesday. Through the CDFI Program, the CDFI Fund makes financial investments in and provides technical assistance grants to CDFIs and organizations seeking CDFI certification that have business plans for creating demonstrable community development impact within their respective target markets for community development financing purposes. Credit unions are among many CDFIs ... * WASHINGTON (7/12/10)--The nomination hearing for three new members of the Board of Governors of the Federal Reserve System will take place Thursday. The witnesses on Panel I will be: The Honorable Janet L. Yellen, to be a member and vice chair of the Board of Governors of the Federal Reserve System; Peter A. Diamond, to be a member of the Board of Governors of the Federal Reserve System; and Sarah Bloom Raskin, to be a Member of the Federal Reserve System. The witnesses on Panel II will be: Osvaldo Luis Gratacós Munet, to be Inspector General, Export-Import Bank; and Mr. Steve A. Linick to be Inspector General, Federal Housing Finance Agency ...

Treasury iGo Directi another way to fight crime on National Night Out

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WASHINGTON (7/12/10)--The U.S. Treasury's Go Direct direct deposit campaign is urging those that are taking part in the upcoming National Night Out to also promote financial safety by distributing Go Direct campaign and Direct Express fliers at neighborhood events. The National Night Out, which will take place on Aug. 3, brings communities and local law enforcement together to increase crime prevention awareness. Over 36 million people throughout the U.S., U.S. territories, Canadian cities, and U.S. military bases participated in 2009’s National Night Out, according to http://www.nationalnightout.org. The Treasury promotes direct deposit through its national Go Direct campaign, and is specifically backing Go Direct as one of many ways that senior citizens and other individuals can “protect their money from financial crimes such as check theft and fraud. The Go Direct campaign is making a number of materials available for distribution, including talking points, newsletter copy, powerpoint slides, and website text. The Treasury recently announced that all federal benefits that are filed on or after March 1, 2011 will be paid electronically via the Go Direct program. For the full Go Direct release, use the resource link.

CUNA Fed seek HMDA perspective from CUs

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WASHINGTON (7/9/10)--The Credit Union National Association (CUNA) and the Federal Reserve have asked credit unions to comment on the costs, benefits and privacy issues associated with portions of the Home Mortgage Disclosure Act (HMDA) that require credit unions and others to collect and report data on home mortgage loans, home improvement loans, and applications that do not result in loan originations. The HMDA requires mortgage lenders to provide detailed annual reports of their mortgage lending activity to regulators and the public. The Fed has asked for input on what types of data should be excluded or eliminated, and if any existing data elements should be modified. The Fed has also requested comment on whether some types of institutions or mortgage loans should be excluded from HMDA reporting. The comment call comes ahead of a series of public hearings that will feature a review of HMDA rules. The first hearing will take place on July 15 in Atlanta, with subsequent hearings set to follow on Aug. 5 in San Francisco, Sept. 16 in Chicago, and Sept. 24 in Washington, D.C. American Airlines FCU's Vice President and General Counsel Faith Anderson and State Employees CU Senior Vice President Phil Greer, both of whom were recommended by CUNA, will testify at the Atlanta hearing. After the HMDA hearings, the Fed may issue a plan that incorporates changes addressed in these hearings and comments received.

Cheney tells Senate leaders Banks wrong on CU biz lending

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WASHINGTON (7/9/10)--In a Thursday letter to Senate leaders Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), Credit Union National Association (CUNA) President/CEO Bill Cheney noted the "stunning hypocrisy" of the banking industry in threatening to "hold hostage" small business lending legislation because it contains a provision to increase the member business lending cap for credit unions. The Independent Community Bankers of America (ICBA) has publicly stated that it would oppose legislation that would help community banks provide an extra $30 billion in loans to small businesses through a government-backed lending fund if that legislation included an amendment that would lift the member business lending cap for credit unions. Cheney decried the ICBA’s “all or nothing” approach, which he emphasized goes against doing what is best for the country’s small businesses. "We believe the focus of the small business legislation should remain on one thing only: ‘What is best for the struggling small businesses across America?’ That is why senators and credit unions support the Udall Amendment to the small business bill," Cheney wrote. That amendment, which was introduced by Sen. Mark Udall (D-Colo.) last month, would increase the current MBL cap to 27.5% of assets, creating an estimated $10 billion in new small business funding and over 108,000 new jobs at no cost to taxpayers. "Unfortunately, the ICBA is not focusing on what is best for America’s small businesses," Cheney wrote. Cheney said that by threatening to “hold hostage” the small business lending fund, the ICBA is attempting to “prevent credit unions from providing more credit to small businesses” while also giving up a “significant opportunity to increase community banks’ own lending.” Overall, the ICBA’s opposition is “not in the best interests of America’s small businesses” and does small businesses “a grave disservice.” While the ICBA and others have challenged lifting the MBL cap, Cheney added that “the record reflects that credit unions are experienced in business lending, have a better pay-off record than banks, and need the Udall Amendment to continue their commitment to members with small business needs. For the full letter, use the resource link.

CU input on RESPA required use clarifications needed

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WASHINGTON (7/9/10)--The Credit Union National Association (CUNA) has asked credit unions to comment on a recently released Department of Housing and Urban Development (HUD) advance notice of proposed rulemaking (ANPR) which seeks to clarify current prohibitions against the “required use” of affiliated settlement service providers for residential mortgage transactions under the Real Estate Settlement Procedures Act (RESPA). The HUD rules aim to address situations in which some homebuyers commit to using a home builder’s affiliated mortgage lender in exchange for construction discounts or discounted upgrades without sufficient opportunity to review the transaction or comparison shop among other lenders. One of the questions asked by CUNA is whether the economic incentives provided in the ANPR would inflate appraisals or lower underwriting standards in the loan market. Credit unions are also asked to comment on whether the home upgrades, settlement discounts, and guaranteed interest rates offered as part of the home purchase process in these situations are illusory, and whether consumers that are offered incentives in these situations would be less likely to comparison shop for these types of settlement services. CUNA has asked that all comments be submitted by Aug. 20. The HUD is accepting comments until Sept.1. For the full comment call, use the resource link.

Inside Washington (07/08/2010)

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* WASHINGTON (7/9/10)--West Virginia Gov. Joe Manchin III said Wednesday he would seek a special election to fill a vacant seat in the U.S. Senate left by Sen. Robert Byrd (D-W.Va.), who died last week. Manchin said he would like the election to be held in November. Last week, the West Virginia Secretary of State Natalie Tennant said an appointment to temporarily fill the seat is required, and an election cannot be held until November 2012 (American Banker July 8). Byrd’s death leaves Democrats two votes shy of 60 votes needed to pass the regulatory reform bill ... * WASHINGTON (7/9/10)--Comptroller of the Currency John Dugan notified President Barack Obama Thursday that he plans to leave office Aug. 14 as his five-year term closes. Dugan noted that the condition of the national banking system has improved and it seems likely that failed and failing national banks will be resolved without taxpayer losses. It also seems likely the government will earn a “substantial profit” from the temporary assistance it provided to national banks during the financial crisis, Dugan added ... * WASHINGTON (7/9/10)--The Federal Deposit Insurance Corp. (FDIC) will discuss a proposed information-sharing agreement among regulators at its board meeting on Monday. Regulators are required to share more data as part of the regulatory reform bill, which has passed the House (American Banker July 8) ... * WASHINGTON (7/9/10)--Regulators in Washington, D.C., need to clarify future rulemaking that will take place as a part of the regulatory reform bill, said Richard Fisher, president of the Federal Reserve Bank of Dallas, on Wednesday (American Banker July 8.) In an interview with CNBC, he said that there is “too much confusion about what’s going forward” so some people are “hoarding cash” and refraining from hiring ... * WASHINGTON (7/9/10)--The average total “g-fee”--guarantee fee--charged by Fannie Mae and Freddie Mac on single-family mortgages fell in 2009 to 22 basis points from 25 basis points in 2008, said the Federal Housing Finance Agency (FHFA). FHFA’s second annual report on guarantee fees concluded that the decline in total guarantee fees charged by Fannie and Freddie in 2009 resulted from significant improvement in the credit profile of the single-family mortgages they acquired relative to 2008. For mortgages acquired in 2009, Fannie and Freddie set the g-fees at levels sufficient to cover expected costs and to provide a modest capital return. The exception are loans originated under the Home Affordable Refinance Program, which offers the enterprises reduced credit exposure ...

Inside Washington (07/07/2010)

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* WASHINGTON (7/8/10)--The Federal Deposit Insurance Corp. (FDIC) is moving forward with plans for a new resolution system regardless of the regulatory reform bill’s progress. The House approved the final reform bill last week and the Senate is expected to approve it soon (American Banker July 7). Under the bill, the FDIC would be required to unwind systemically significant institutions to prevent a collapse such as the one caused by the bankruptcy of Lehman Brothers in 2008. FDIC also would need to provide market clarity for creditors on what they would receive in the event of a failure; designate FDIC officials to focus on the new resolution powers and research companies it may have to unwind. The bill would give FDIC the power to lead or participate in rule-writing with other regulators, borrow from the Treasury and require large firms to write their own “living wills,” or resolution processes. Michael Krimminger, deputy to the FDIC chairman for policy, told the Banker that the FDIC plans to move quickly to establish a resolution process so that it won’t be caught unprepared in a situation similar to the Lehman Brothers bankruptcy ... * WASHINGTON (7/8/10)--Edward L. Yingling, president/CEO of the American Bankers Association (ABA), plans to retire Dec. 31, according to a press release. Yingling, 61, said he plans to stay active in the banking industry. He worked for the ABA for 25 years. A committee comprised of ABA board members and former officers has been created to search for Yingling’s replacement ...

CUNA posts analysis of Fed final CARD Act rule

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WASHINGTON (7/8/10)—The Credit Union National Association (CUNA) Wednesday issued an analysis of the last final rule that implements provisions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. The CARD Act was enacted last year to prohibit and restrict a number of credit card practices. This final rule implements provisions, effective Aug. 22, intended to protect credit card users from unreasonable penalty fees and that require card issuers to reconsider interest rate increases every six months after an increased rate becomes effective. Among other provisions, the final rule:
* Limits penalty fees to $25, unless there are repeated violations or the issuer can demonstrate that a higher fee represents a reasonable portion of the cost it incurs as a result of these violations; * Prohibits card issuers from charging penalty fees that exceed the dollar amount associated with the violation. For example, if the minimum payment is $20, the late payment fee can no longer exceed $20; * Bans inactivity fees or fees for closing and terminating the account; * Prevents card issuers from charging multiple penalty fees based on a single violation; * Implements requirements that card issuers inform consumers of the reasons for a rate hike; and * Requires that for rate increases since Jan. 1, 2009 , issuers must review these increases every six months and reduce the rate if the reasons for the increase no longer apply.
The rule applies to credit cards, but not to home equity lines of credit accessed by credit cards or to overdraft lines of credit accessed by debit cards. For more on the Fed’s final rule, use the resource link below.

NCUA schedules special closed meeting this month

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ALEXANDRIA, Va. (7/8/10)--The National Credit Union Administration (NCUA) added a special July 30 closed board meeting to its schedule yesterday. Already slated for the month are a July 29 open board meeting and a closed meeting following immediately after that session. The NCUA confirmed that the July 29 closed meeting remains on the schedule. Agendas are not yet available for any of the three meetings. Typically, the NCUA releases it’s agendas one week prior a meeting. Use the resource link below on July 22 and July 23 to see the NCUA agenda items.

Cheney refutes iAmerican Bankeri CU criticism

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WASHINGTON (7/8/10)—Responding to a recent American Banker story on poor credit union performance, Credit Union National Association (CUNA) President/CEO Bill Cheney said that credit unions are “coping with today's economic challenges and continue to shine.” Saying that credit unions did nothing to create the current financial difficulties, Cheney also noted that while there have been around 40 credit union failures since 2009 began, that number is relatively low when compared to the 225 banks that have failed in that same time period. Even with those difficulties, the credit union system has stabilized itself on its own, without direct government financial bailouts. CUNA is also developing initiatives to help the corporate credit union system evolve and strengthen, Cheney added. The delinquency and net charge off rates at credit unions are also well below those seen at banks, Cheney reported. Credit unions have also been steadily increasing their lending to small businesses, with those portfolios growing at a rate of 9% during the year ended March 2010. However, Cheney said, the American Banker item did make some valid points “about the impact that legislative and regulatory changes to overdraft protection and interchange fees will have on credit union balance sheets.” Credit unions continue to work to resolve the interchange fee issues, and are pushing senators to approve legislation that would increase the cap on credit union member business lending to 27.5% of assets. CUNA is also supporting legislation that would allow credit unions to raise supplemental capital.

IRS extends homebuyer tax credit closing deadline to Sept. 30

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WASHINGTON (7/8/10)--The U.S. Internal Revenue Service has announced that the closing deadline for homebuyer tax credits under the Homebuyer Assistance and Improvement Act of 2010 has been extended until Sept. 30. The tax credit applies to taxpayers that entered into binding home purchase contracts before April 30. The previous closing deadline was June 30. In a release, the IRS said that special filing and documentation requirements apply to those who are looking to claim the homebuyer credit. “To avoid refund delays, those who entered into a purchase contract on or before April 30, but closed after that date, should attach to their return a copy of the pages from the signed contract showing all parties' names and signatures if required by local law, the property address, the purchase price, and the date of the contract,” the IRS added. Eligible homebuyers should also include a copy of the settlement statement, an executed retail sales contract, or a certificate of occupancy with their returns, the IRS added. Taxpayers must have lived in their previous home for a period of at least five years to qualify for the tax break. For the full IRS release, use the resource link.

Inside Washington (07/06/2010)

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* WASHINGTON (7/7/10)--Sen. Maria Cantwell (D-Wash.) announced Thursday that she intends to support the regulatory reform bill, providing a boost to the bill’s prospects in the Senate, said American Banker (July 2). The Senate could take up the bill this month after the Fourth of July recess. Originally, the Senate was expected to tackle the bill this week, but the death of Sen. Robert Byrd (D-W.Va.) and Republicans’ objections to a mechanism that would pay for the bill caused a delay. The objections prompted the regulatory reform conference committee to meet Tuesday to come up with a substitute payment mechanism. Sixty votes are needed to pass the bill. Democrats controlled 59 seats before Byrd’s death. Cantwell opposed an earlier version of the bill passed in May. She, along with Sen. Russ Feingold (D-Wis.), argued the bill did not “go far enough” ...

FHFA Energy retrofit loan programs need re-examined

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WASHINGTON (7/7/10)—The Federal Housing Finance Agency (FHFA) on Tuesday determined that “certain energy retrofit lending programs present significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.” The FHFA said that programs that are presented as Property Assessed Clean Energy (PACE) programs, many of which ease the lending process for energy-saving property retrofitting projects, can “pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors.” Credit Union National Association (CUNA) Senior Assistant General Counsel Jeffrey Bloch said that CUNA shares concerns "similar to those expressed by the FHFA." "For credit unions making mortgage loans, these types of energy loans that are paid through the property tax bills adversely affect the lien position of credit unions, and the increased payments can cause repayment problems later, neither of which were contemplated at the time the loans were made," he said. "CUNA is also concerned "that those selling these energy improvements will be concerned primarily with selling the product, as opposed to whether the borrower can afford these higher payments. Although we all can support energy efficiency, these programs can pose risks to credit unions," Bloch added. As explained in The New York Times on July 1, the program works by having local governments issue bonds or borrow money that can then be used for home loans that cover the upfront costs of solar installations or other energy improvements. Homeowners who take part in these loans can then repay them over time through their property-tax bills. As reported in News Now on Tuesday, the U.S. Department of Energy is trying to expand the program, and the Obama administration has tagged $150 million in stimulus money for the program. The FHFA also urged state and local governments to pause and re-evaluate these programs, adding that “the size and duration of PACE loans exceed typical local tax programs” and lack the “traditional community benefits associated with taxing initiatives.” The FHFA directed Fannie, Freddie and the Federal Home Loan Banks to waive their uniform security instrument prohibitions against senior liens and adjust their loan-to-value ratios, loan covenants, and borrower debt-to-income ratios to adapt to the needs of PACE program loans. For the full FHFA release, use the resource link.

CUNAs Cheney to CUs Keep the volume up on interchange MBLs

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WASHINGTON (7/7/10)--With Congress remaining out of session until July 12, the Credit Union National Association (CUNA) and credit unions nationwide are activating grassroots at home to urge Congress to lift the credit union member business lending (MBL) cap and continue to oppose passage of the financial regulatory restructuring bill containing interchange. The House passed the financial regulatory reform conference report by a 237 to 182 vote last week, and CUNA opposes the bill as long as it contains language that would allow government intervention in interchange fees. However, CUNA noted that, without interchange, the remainder of the bill "strikes a careful balance in protecting consumers while providing meaningful financial reform." It is not known when the Senate will officially take up the bill for a vote, but credit unions continue to reach out to key senators who have expressed some caution over the interchange changes via phone calls, e-mails, and the mass media. CUNA President/CEO Bill Cheney said that it is "vital" that credit unions keep up their grassroots efforts during the Independence Day in-district work period by "voicing to senators their opposition to the financial regulatory reform bill, because of interchange, and to voice support for the Udall amendment on member business loans -- refuting any banker rhetoric they may hear." Credit unions and CUNA are specifically targeting the Senate to grow the base of support for lifting the MBL cap. Sen. Mark Udall (D-Colo.) last week proposed adding an MBL cap amendment to H.R. 5297, the Small Business Lending Fund Act. Udall’s amendment would increase the MBL cap to 27.5% of total assets, pending certain criteria. Credit unions this week are meeting directly with their senators to stress the aid that an MBL cap lift would bring to the nation’s economy. Those credit unions will also enlist the support of small business owners who have worked with their local credit unions. CUNA has estimated that lifting the MBL cap to 25% of a credit union’s assets would inject over $10 billion in new funds into the economy, creating over 108,000 new jobs. Similar legislation, introduced by Rep. Paul Kanjorski (D-Pa.) in the House, has over 100 co-sponsors. To contact local representatives via CUNA's credit union grassroots action center, use the resource link.

Compliance Trifecta Overdraft FACTA Reg Z rules all in effect

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WASHINGTON (7/6/10)—In what Credit Union National Association (CUNA) Senior Vice President for Compliance Kathy Thompson calls the “compliance trifecta,” major rules went into effect July 1 that impact credit union operations. New standards under the Fair and Accurate Credit Transaction Act (FACTA), overdraft protection plan restrictions, and the Federal Reserve Board’s (Fed)Regulation Z changes for open-end credit became the rule of compliance land last Thursday. Regarding the new FACTA rules, Thompson reminds credit unions that they have to be prepared for handling direct disputes with members. “The new FACTA regulations not only require credit unions to establish and implement reasonable written policies and procedures to ensure the ‘accuracy’ and ‘integrity’ of the information that they furnish to credit bureaus,” noted Thompson, “but also require a credit union to investigate when a member formally complaints to the credit union about the accuracy of information the credit union has provided to a credit bureau.” The new Regulation E overdraft rules for ATM and one-time debit card transactions require credit unions to provide members with the right to opt in, or affirmatively consent, to a credit union’s overdraft service for ATM and one-time debit card transactions. “The requirement that notice of the opt-in right be provided and the member’s affirmative consent obtained before any fees or charges may be assessed is effective July 1 for new accounts,” Thompson reminds credit unions, “with credit unions having until August 15 to implement these requirements for existing accounts.” This regulation does not apply to overdraft fees related to check, ACH, or recurring debit transactions. And for the new Reg Z open-end lending rules, Thompson reminds credit unions that the new rules effective last week were the result of the melding of a January 2009 open-end final rule and modifications contained in the Credit Card Accountability, Responsibility and Disclosure (CARD) Act which Congress passed in May 2009. The Credit CARD Act modified certain requirements of the January 2009 final rule related to periodic statements, change-in-terms, and advertising provisions and changed their effective date to Feb. 22. On Jan. 12, when the Fed issued its Regulation Z final rule for the credit card provisions that were effective Feb. 22 it re-issued the remaining provisions of the January 2009 general open-end lending rule by incorporating those provisions into the new Card Act final rule. The new rules that became effective last week generally deal with formatting provisions, such as the new summary table in the account opening disclosures, the revised summary table for credit card applications and solicitations, a few changes to periodic statements, and some changes to advertising requirements.

Inside Washington (07/05/2010)

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* WASHINGTON (7/6/10)--Eligible taxpayers who contracted to buy a home and qualified for the first-time homebuyer tax credit before April 30 now have until Sept. 30 to close the deal, according to the Internal Revenue Service. The Homebuyer Assistance and Improvement Act of 2010, signed by President Barack Obama last week, extends the closing deadline to Sept. 30 from June 30. Those who entered into a purchase contract before or on April 30 but closed after that date should attach to their tax return a copy of the pages from the signed contract showing all parties’ names and signatures if required by local law, the property address, the purchase price and the date of the contract ... * WASHINGTON (7/6/10)--Senate leaders wrote to their colleagues in the House last week to clarify the intent of a derivatives provision in the financial regulatory reform bill (American Banker July 2). The House Wednesday approved the bill and the Senate plans to take it up when they return from Independence Day recess. The letter states that the legislation is intended to continue to allow end-users to use derivatives to hedge risks. The letter addresses concerns raised by Sen. Saxby Chambliss (R-Ga), who said the legislation could be interpreted as stopping end-users from hedging risk ... * WASHINGTON (7/6/10)--Regulators are requiring banks to list how many unfunded commercial and industrial loans they have (American Banker July 2). The information aims to show which banks use capital to work with commercial borrowers, and it will give investors more information about those loan categories. Banks began making such disclosures in first-quarter filings with the Federal Deposit Insurance Corp. However, analysts said more disclosures are needed to determine lending trends. Though the data is not “perfect information,” the transparency provides a better indication of what is going on at the banks rather than guesswork, Frank Barkocy, director of research at Mendon Capital Advisors Corp., told the Banker ... * WASHINGTON (7/2/10)--The U.S. Department of Energy is trying to expand a program started in California and intended to make it easier and cheaper for homeowners to improve energy efficiencies through the mortgages on their homes. The Obama administration has tagged $150 million in stimulus money for the program, which can help homeowners do such things as retrofit their homes for solar energy, while paying for it over time through their property-tax bills. However, the government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae may throw a huge monkey wrench into the government’s plan (The New York Times July 1). Freddie and Fannie both warned that they may not purchase loans for homes that have used the energy financing. As explained in the Times article, this is how the program, called Property Assessed Clean Energy (PACE), works: A local government issues bonds or borrows money through other means, and uses it for home loans that cover the upfront costs of solar installations or other energy improvements. The homeowner has 20 years to repay the loans through a special assessment included in the property tax--which stays with the home even if the house is sold. So far the program has limped along. Although available in 22 states, only a few thousand people reportedly have used it since it started in 2008. That poor showing may not change any time soon--despite the Energy Department’s plan for a push--if Fannie and Freddie step away from such loans. The articles says the GSEs are concerned about the potential burden on taxpayers if a homeowner defaults on a such a mortgage because, in most cases, property taxes must be paid first from any proceeds on a foreclosure. The GSEs’ concerns have unsettled homeowners and PACE programs alike. Some alarmed state officials have, at least for now, frozen their programs ...

CU reps to testify at Fed July HMDA hearing

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WASHINGTON (7/2/10)--A pair of credit union representatives will be among those testifying at a July 15 Federal Reserve Board public hearing on the Home Mortgage Disclosure Act (HMDA). The credit union representatives, who were recommended to the Fed by the Credit Union National Association, are American Airlines FCU’s Vice President and General Counsel Faith Anderson and State Employees CU Senior Vice President Phil Greer. The HMDA requires mortgage lenders to provide detailed annual reports of their mortgage lending activity to regulators and the public. The hearing will be held at the Federal Reserve Bank of Atlanta. The Fed has planned additional hearings San Francisco on Aug. 5, in Chicago on Sept. 16, and in Washington, D.C. on Sept. 24. The hearings, which were announced by the Fed earlier this year, are meant to evaluate whether the 2002 revisions to Regulation C, which required lenders to report mortgage pricing data, helped provide useful and accurate information about the mortgage market. The hearings are also aimed at helping the agency assess the need for additional data and other improvements and identify emerging mortgage market issues. Although additional information may improve the usefulness of the HMDA data, the Fed also has recognized that this would increase compliance burdens and costs and may pose risks to consumer privacy. In conjunction with these hearings, the Fed has requested public comment on the various issues that will be the subject of these hearings, and the Credit Union National Association will submit a comment letter. After the HMDA hearings, the Fed may issue a plan that incorporates changes addressed in these hearings and comments received.

National Flood Insurance extended to Sept. 30

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WASHINGTON (7/6/10)—The National Flood Insurance Program (NFIP) was given an extension to Sept. 30 when the President signed H.R. 5569 into law Friday. Also signed into law was H.R.5623, the Homebuyer Assistance and Improvement Act, which amends the Internal Revenue Code to extend eligibility for a first-time homebuyer tax credit until Sept. 30. The credit is for taxpayers who entered into a binding contract to purchase a principal residence before May 1. Regarding the flood insurance program, the Federal Emergency Management Agency's (FEMA) authority to extend flood insurance contracts under NFIP must be periodically reauthorized by Congress. That authority has lapsed three times this year, with lawmakers approving short extensions each time. The third lapse started June 1.

CUNA Small-amount loan plan needs to be flexible

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WASHINGTON (7/6/10)—Credit unions need more authority to offer short-term, small-amount (STS) loans to help combat predatory payday lending. If federal regulators go forward with a plan intended to support that goal, the rules must not be too prescriptive, the Credit Union National Association (CUNA) wrote in a comment letter Friday. The National Credit Union Administration (NCUA) at its April 29 board meeting proposed to enable federal credit unions to offer STS loans, with a number of conditions, including:
* An annual percentage rate (APR) that may not exceed 1,000 basis points above the Federal Credit Union Act interest rate ceiling. With the current ceiling at 18%, the maximum rate for the STS loan would be 28%. This higher APR would only be permitted for STS loans; * An application fee would be permitted, but may not exceed $20; * A minimum maturity of one month, with a maximum of six months. Rolling over the loan, a common feature of other types of payday loans, would be prohibited; * The loan amount must be a minimum of $200 and a maximum of $1,000; * The FCU would be permitted to make only one loan at a time to a member and no more than three in any rolling six-month period; * Late fees would be permitted, but terms and loan amounts should be based on the borrower's proof of recurring income so that the borrower is able to pay off the loan in a timely manner; and * FCUs must include a cap on the number and total dollar amount of STS loans, which is to be included in their written lending policies. FCUs must also implement appropriate underwriting criteria.
In its comment letter, CUNA expressed concern that the proposal may be too prescriptive and requested that the NCUA provide additional flexibility for those credit unions that want to offer these types of programs. Among its recommendations, CUNA said, credit unions should be able to choose between the proposed 28% APR, that also allows an application fee of $20, or an APR of 36% that incorporates other fees. CUNA also believes there should be flexibility with regard to the proposed prohibition on the member’s ability to “roll-over” the loan beyond the stated maturity date, and said federal credit unions should be able to provide loans less than the proposed $200 minimum if their members have such a need. CUNA also said that a $20 application fee may be too low to reflect the actual cost of processing the small-loan applications. Use the resource link below to read CUNA’s complete comments.

CUNA projects premium at 6-10 bp this year

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WASHINGTON (7/2/10)—The Credit Union National Association (CUNA) released a white paper Thursday called “Estimating the 2010 NCUSIF Share Insurance Premium,” and it predicts that the National Credit Union Share Insurance Fund (NCUSIF)premium expected to be announced this fall will be in the range of six to 10 basis points of insured shares. That is well within the lower end of the five-25 basis point range projected by the National Credit Union Administration (NCUA) last year, points out CUNA Chief Economist Bill Hampel, the author of the white paper. The fall premium will follow the NCUA’s recently announced assessment of 13.4 basis points of insured shares for Corporate Stabilization, which was in line with expectations. The size of that assessment Hampel notes, suggest neither an increase nor a decrease in the latest estimate of ultimate cost to credit unions of the Corporate Stabilization--a figure whose total will not be known for at least a few more years. Hampel’s fall premium projection assumes that an NCUSIF equity ratio of 1.25% of insured shares would be reasonable at that time, “given the current and expected economic climate, credit unions’ financial condition, and the outlook for additional insurance losses over the coming year.” With the NCUSIF equity ratio at 1.22% as of the most recent reading in May, Hampel says that if current trends continue, by the time the premium is announced the fund’s equity ratio will have declined to 1.19%. “Even with considerable additional insurance losses in the next few months,” Hampel says, “it is highly unlikely that the fund will fall below 1.15% by the time the premium is announced.” That would set the range at Hampel’s predicted six to 10 basis points. Looking ahead to next year, if actual losses from failed credit unions are close to expectations, there will not be a need for much of a premium in 2011, leaving only another Corporate Stabilization assessment of slightly less than 15 basis points. For more, use the resource link below.

NCUA files notice for possible U.S. Central claims

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ALEXANDRIA, Va. (7/2/10)--The National Credit Union Administration (NCUA) announced Thursday it has filed a "notice of claim" with Travelers Casualty & Surety Co. to "preserve NCUA’s right to the full amount of coverage provided under U.S. Central’s Directors and Officers Liability policy." The NCUA announcement noted that there was a June 30 deadline to file the notice of the claim with U.S. Central's liability insurer in order to preserve the agency’s right to seek recoveries under the policy. The procedural move does not mean the agency will necessarily pursue action against individuals. The agency acknowledged the filing is a preliminary step. "NCUA will take the time necessary to complete its investigation and decide at a later date whether or not to initiate civil litigation against any individual directors or officers," the agency release said. Individual notices, called "demand letters," were sent by the NCUA to 18 former U.S. Central directors and officers. The former board included now-incoming Credit Union National Association (CUNA) President/CEO Bill Cheney (then CEO of the California/Nevada Credit Union Leagues), CUNA Chief Operating Officer-Madison John Franklin, and Missouri Credit Union Association President Roshara Holub. "I am confident the record will show that, throughout Bill Cheney's service on the board of U.S. Central, as well as throughout the tenure of John Franklin and Rosie Holub, they took their duties very seriously and participated in meetings of the board out of a dedication to the best interests of the corporate credit union’s members," noted CUNA President Dan Mica. Cheney and Holub served on the board in their capacity as representatives of the American Association of Credit Union Leagues (AACUL) and Franklin as a representative of CUNA. The NCUA Inspector General also is required by law to conduct an independent Material Loss Review of the circumstances surrounding the losses at U.S. Central. The review is being done to determine the causes of U.S. Central’s losses absorbed by NCUA’s Corporate Stabilization Fund; and assess NCUA’s supervision of U.S. Central. A full report will be issued by the Inspector General when the review is complete. U.S. Central was placed under conservatorship on March 23, 2009.

Inside Washington (07/01/2010)

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* WASHINGTON (7/2/10)--The conference committee of the regulatory reform bill Wednesday approved a 20 basis point hike for the Federal Deposit Insurance Corp.’s (FDIC) minimum ratio of reserves to insured deposits for banks (American Banker July 1). It also limited the higher premiums to banks with more than $10 billion in assets, triggering concerns from lawmakers and bankers. There are 69 banks with assets between $10 billion and $50 billion that will now have to pay higher premiums as a result of the bill. Some banks said they didn’t cause the financial crisis, but now are being required to pay for it. Gerald Howard Lipkin, chairman and president of Valley National Bank, Wayne, N.J., said his institution didn’t make subprime mortgages and didn’t securitize products that were bad for consumers or the nation. Others said the premiums made sense because without it, the FDIC would have had to raise the reserve ratio on its own. The new provision builds on the overall framework of changes to deposit insurance, which are intended to and will punish banks based on size, Karen Shaw Petrou, managing partner of Federal Financial Analytics Inc., told American Banker (July 1) ... * WASHINGTON (7/2/10)--The solutions needed to foster a healthy credit environment are complex and will take time to develop, according to Federal Reserve Board Gov. Elizabeth Duke in a speech Monday. Duke discussed the condition of the banking system, the regulatory environment, borrowers’ financial conditions and the economy’s strength. “There really is no single step that can be taken to quickly unclog all the lending markets,” she said. “Just as the causes for the decline in lending are multifaceted and complex and took time to evolve, the solutions will likely be equally difficult and will take time to fully work.” Returning to a normal lending environment, she said, will require constant collaboration and communication among policymakers, bankers, regulators, investors, consumers and businesses ...

NCUA announces CU liquidation merger

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ALEXANDRIA, Va. (7/2/10)--The National Credit Union Administration (NCUA) on Thursday allowed Virginia Beach, Va.-based Chartway FCU to assume some of the assets and liabilities of Saint George, Utah’s, Southwest Community FCU, which was liquidated on Wednesday. Southwest, which was founded in 1937, held just over $139 million in assets from 19,041 members at the time of its liquidation. In a Thursday release, the NCUA said that services to former Southwest members will not be interrupted and that $250,000 of each of those member accounts will remain covered by the National Credit Union Share Insurance Fund (NCUSIF). Chartway FCU holds $1.6 billion in assets from 191,000 members spread throughout the southeast, New Jersey, Ohio, Rhode Island and Utah through individual and shared locations. This is the 10th federally insured credit union liquidation in 2010. The NCUA also announced the merger of Marks, Miss.'s First Delta FCU and Shreveport (La.) FCU on Thursday. First Delta had been held in conservatorship by the NCUA since October and held $5.6 million in assets from 3,000 members at the time of its closure. Shreveport FCU currently holds $81.9 million in assets from 18,000 members in Mississippi and Louisiana. For the full NCUA releases, use the resource links.

Frank again emphasizes interchange exemption

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WASHINGTON (7/2/10)--Speaking before the House following the passage of financial regulatory reform legislation on Wednesday, Rep. Barney Frank (D-Mass.) repeated earlier assurances that credit unions and other small institutions would be exempted from the terms of recently added interchange fee legislation. Language in the interchange amendment would ensure that credit unions with under $10 billion in assets were held exempt from the Fed interchange changes. The interchange fee amendment, which was offered by Sen. Richard Durbin (D-Ill.) and ultimately agreed to by the recently completed regulatory reform conference committee, would allow the Federal Reserve to intervene in the setting of those fees. In his remarks, Frank said that credit unions and other small issuers would also continue to be permitted to issue their debit cards without any market penalties. Frank earlier this week expressed similar sentiments in a letter to his colleagues. Following that release, the Credit Union National Association (CUNA) said that Frank’s memo and more recent comments serve as excellent notice of the Congress's strong intent to exempt credit unions and community banks from the reaches of the provision that requires the Fed to set interchange fees. Mica said the memo gives the Fed strong guidance to follow in the event that the provision is enacted and the Fed is called upon to implement it. The regulatory reform package passed the House 237 to 182 on Wednesday, and it is not known when the Senate will take up the legislation. The Senate on Thursday was essentially closed for business in observance of Sen. Robert Byrd (D-W.Va.), who died earlier this week. CUNA continues to urge legislators to oppose the bill unless the interchange changes are removed from the final version of the bill.

Voluntary merger PandA guidance released by NCUA

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ALEXANDRIA, Va. (7/2/10)--The National Credit Union Administration (NCUA) on Thursday provided credit unions with background information on its purchase and assumption (P&A) and merger process and detailed the criteria that the agency uses to evaluate P&As and mergers. The NCUA letter to credit unions also covers the NCUA’s identification of merger and P&A partners as well as its “selection of an acquirer in the limited circumstances when NCUA is involved in making the choice.” The Credit Union National Association’s merger task force, which was led by Ohio Credit Union League President Paul Mercer, pushed for this guidance. According to the letter, the NCUA allows credit unions that are in a state of financial distress to undertake voluntary liquidation, involuntary liquidation, an involuntary liquidation followed by a P&A, or voluntary, unassisted supervisory, or assisted mergers. According to the NCUA, its role in voluntary mergers and unassisted supervisory mergers is mainly supervisory. However, the agency said it does take on a “much greater” role in assisted mergers and P&As. That role includes identifying and selecting the failing credit union’s “continuing credit union partner.” However, the NCUA adds, that role depends on several factors, including the potential loss to the National Credit Union Share Insurance Fund (NCUSIF), and the size, the financial stability, and the complexity of the acquired credit union. When deciding to approve, defer, or deny merger or P&A applications, the NCUA said it fully examines if the continuing credit union “can safely and soundly absorb the financial and operational impact that will result from the acquired credit union.” The NCUA also attempts to determine “whether the acquired credit union’s field of membership is compatible with the continuing credit union’s field of membership” and “whether the required membership notice sent by the acquired credit union properly informs the membership about the action.” For the full NCUA letter, use the resource link.