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Mica Corporates are feeling strain but remain strong

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WASHINGTON (8/12/08)--Credit Union National Association (CUNA) President/CEO Dan Mica pointed out that yesterday's Wall Street Journal story about corporate credit union balance sheets reports what corporates have been telling their member credit unions for some time--that they do have some investments that are feeling the strain of the mortgage crisis, but the unrealized losses are expected to recover over time as the housing market improves. Mica's comments were in response to Monday's front page Wall Street Journal story entitled "Mortgage-Market Trouble Reaches Big Credit Unions." (Use the link below to access the complete story online.) Mica said the National Credit Union Administration (NCUA) also has been on the case, as evidenced by its June Letter to Credit Unions, which addressed the impact of the current mortgage market on corporate credit unions. It pointed out steps corporate credit unions have been taking to address their continued safety and soundness in the downturn in the housing market. Mica also reiterated, as NCUA's Kent Buckham and the corporate representatives did in the story, that CUNA is confident the likelihood of significant realized losses is very remote. Also, the investments at issue continue to pay interest and principle on schedule. In addition to NCUA, the national rating agencies and the corporates' financial auditors have attested to the fact that corporates remain safe and sound, he added. "Nevertheless, we are keenly aware of the public impact that front-page headlines in the Wall Street Journal can and do have" said Mica. "I am in contact with leaders of the corporate credit union system today, and will be talking to them about continued and clear communication about the issues raised in the article."

Inside Washington (08/11/2008)

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* WASHINGTON (8/12/-08)—The Federal Reserve Board Monday announced a restructuring of its check processing operation in its fourth district. As of Oct. 18, the Cincinnati branch office of the Federal Reserve Bank (FRB) of Cleveland no longer will process checks. Financial institutions currently served by that office will be reassigned to the head office of the FRB of Cleveland. Routing numbers associated with the Cincinnati branch office are reassigned to the Cleveland head office. As a result of these changes, some checks deposited in the affected regions that currently are nonlocal checks will become local checks that are subject to shorter permissible hold periods... * WASHINGTON (8/12/08)--Bankers are working to kill a proposal by the National Credit Union Administration (NCUA), Federal Reserve Board and the Office of Thrift Supervision that would crack down on deceptive credit card practices by limiting or prohibiting seven credit card practices and two practices relating to overdraft protection plans. Bankers and trade groups argue the plan would increase costs and limit access to credit (American Banker Aug. 11). The Credit Union National Association supports the proposal and wrote in a recent comment letter that regulatory action on the issue is appropriate because consumers have been subject to predatory practices in the financial marketplace ... * WASHINGTON (8/12/08)--Joseph Stilwell, an activist shareholder, is trying to block a rule change by the Office of Thrift Supervision that would let recently converted thrifts limit the stocks a shareholder can own (American Banker Aug. 11). The rule is scheduled to become effective Oct. 1. An investor currently can own up to 10% of shares. Stilwell says the rule is unlawful and has filed a petition against it ... * WASHINGTON (8/12/08)--The Treasury Department isn’t planning to put more money into Fannie Mae or Freddie Mac, Treasury Secretary Henry Paulson said Sunday (Bloomberg Aug. 11). The government-sponsored enterprises reported losses three times larger than estimated. Paulson said their losses were not a surprise, and that the housing crisis is the economy’s biggest threat. Paulson also said a second economic stimulus package, called for by House Speaker Nancy Pelosi (D-Calif.), is not needed yet ... * WASHINGTON (8/12/08)--J. Richard (Dick) Harvey Jr. will serve as senior advisor to the Internal Revenue Service (IRS) Commissioner Doug Schulman, effective Sept. 2, the IRS said Monday. Harvey is a partner at PricewaterhouseCoopers, where he serves as the U.S. banking and capital markets team leader. He will provide guidance on policy and tax administration. He also will maintain a partnership between the commissioner’s office and business units such as the Large and Mid-Size Business Division ...

Reg burden for CUs focus of attorneys

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WASHINGTON (8/12/08)—The Credit Union Committee of the American Bar Association (ABA) has agreed to take on a new assignment this year—a review of the regulatory burden of credit unions. The ABA credit union unit is comprised of several subcommittees which focus on specific issues, such as supervision, operations, electronic services, and corporate governance. Those subcommittees will start this Fall to take a comprehensive look at the regulatory responsibilities of credit unions and develop recommendations to ease the burden. "We all know that credit unions are operating under tremendous regulatory responsibilities and that are ever-increasing,” said committee chair Mary Dunn, who is deputy general counsel for the Credit Union National Association (CUNA). “Credit union attorneys want to do our part to take a look at this burden and develop important recommendations on how to lighten the load," Dunn said. Faith Anderson, vice president and general counsel of American Airlines FCU and vice chair of the ABA credit union committee, added, "The committee's members discussed a wide range of issues but the dominant theme was that there are too many new rules we all have to contend with. “The credit union bar wants to be part of an effort to help contain regulatory growth." Other topics the committee addressed included a review by National Credit Union Administration (NCUA) Associate General Counsel John Ianno on current and upcoming NCUA issues, a discussion of examination issues by NCUA's John Kutchey, compliance for remote deposit capture items by attorney Brian Witt, and Fair Credit Act reporting issues from attorneys Andrew Keeney and Lysa Simon. Dunn said the fair credit reporting presentation focused on credit unions' responsibilities under the Fair Credit Reporting Act to report accurate information to consumer reporting agencies, conduct prompt investigations when there have been a dispute and correct information reported erroneously. It was noted that a number of lawsuits have been brought against financial institutions regarding alleged mistakes in reporting debts charged off in bankruptcy and that credit unions should make sure they are in compliance with credit reporting requirements. The Credit Union Committee met this weekend in New York concurrent with the ABA's annual meeting there. The next meeting of the committee will be in conjunction with CUNA's Attorneys Conference in Charleston September 22.

New mortgage foreclosure protections for servicemembers (08/11/2008)

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WASHINGTON (8/12/08)--Credit unions should be aware that a recently enacted housing law provides some immediate protection to servicemembers having trouble making mortgage payments, the Credit Union National Association (CUNA) has advised. The Housing and Economic Recovery Act was signed into law late last month. It is meant, in part, to mitigate burgeoning mortgage foreclosures in a stressed housing market. That new law amends the Servicemembers Civil Relief Act (SCRA) by:
* Offering nine months of protection (formerly 90 days) from mortgage foreclosures for returning servicemembers after they separate from active duty. This provision remains in effect until December 31, 2010; and * Extending the SCRA’s six percent interest rate cap for one year (formerly 90 days) beyond the period of military service if the debt is a mortgage, trust deed, or other security in the nature of a mortgage.
The new recovery law also requires the Department of Defense to implement a foreclosure-prevention counseling program for servicemembers returning from active duty abroad. Refer to the resource link below for more guidance on SCRA requirements.

New mortgage foreclosure protections for servicemembers

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WASHINGTON (8/12/08)--Credit unions should be aware that a recently enacted housing law provides some immediate protection to servicemembers having trouble making mortgage payments, the Credit Union National Association (CUNA) has advised. The Housing and Economic Recovery Act was signed into law late last month. It is meant, in part, to mitigate burgeoning mortgage foreclosures in a stressed housing market. That new law amends the Servicemembers Civil Relief Act (SCRA) by:
* Offering nine months of protection (formerly 90 days) from mortgage foreclosures for returning servicemembers after they separate from active duty. This provision remains in effect until December 31, 2010; and * Extending the SCRA’s six percent interest rate cap for one year (formerly 90 days) beyond the period of military service if the debt is a mortgage, trust deed, or other security in the nature of a mortgage.
The new recovery law also requires the Department of Defense to implement a foreclosure-prevention counseling program for servicemembers returning from active duty abroad. Refer to the resource link below for more guidance on SCRA requirements.

NCUA reiterates corporates strength after iWSJi story

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ALEXANDRIA, Va. (8/12/08)--Following a story in yesterday’s Wall Street Journal, the National Credit Union Administration (NCUA) said it would continue prudent regulatory oversight and close supervision of the corporate credit union system, which the agency said maintains a “strong” liquidity position. NCUA’s statement was in response to Monday’s front page Wall Street Journal story entitled “Mortgage-Market Trouble Reaches Big Credit Unions.” (Use the link below to access the complete story online.) That story primarily addressed the impact of current market conditions on fair values of mortgage-related securities held by five corporate credit unions. The article notes as of May 31, five corporate credit unions have reported $5.7 billion in accumulated unrealized losses on available-for-sale securities. Additionally, the article discusses the reclassification of some securities from available-for-sale to held-to-maturity on the balance sheets of U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp). In a statement, NCUA said its Office of Corporate Credit Unions (OCCU) “continues to dedicate its resources to ensuring corporate credit unions are managing their balance sheets appropriately during this stressed market affecting mortgage-related securities. OCCU will not change its regulatory strategy as a result of this article.” NCUA said corporate credit unions, by regulation, are limited to the most highly credit rated investments, and that the vast majority of mortgage-related securities held by corporate credit unions “continue to be highly rated and continue to perform as expected.” “However, the lack of liquidity in the mortgage-related securities market has resulted in many financial institutions, including corporates, having to record accumulated unrealized losses on available-for-sale securities,” said NCUA. “These adjustments have been made in accordance with generally accepted accounting principles (GAAP) as set forth in Financial Accounting Standards Board (FASB) Statement of Financial Accounting (SFAS) No. 157 Fair Value Measures.” The agency also reiterated that corporate credit unions’ liquidity position is “strong.” “Corporate credit unions have ample liquidity to meet foreseeable liquidity demands,” said NCUA. “Furthermore, they have established additional liquidity sources in the event of increased liquidity demands from their members.” As part of its ongoing supervision, NCUA said OCCU monitors the liquidity position of the largest corporate credit unions “daily.” NCUA said U.S. Central and WesCorp have demonstrated they have “the ability and intent to hold securities transferred to maturity.” “As such, this reclassification of securities complies with GAAP. In addition, the securities reclassification was reviewed by their auditors and OCCU,” said NCUA.