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Corporates Market not affecting ability to support CUs

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WASHINGTON (8/15/08)--Although market disruptions have affected corporate credit unions, along with virtually all other types of financial institutions, those disruptions have not affected corporate credit unions' ability to support the industry, officials said this week. Tuesday's edition of the The Kansas City Star reported that although U.S. Central FCU has seen a sharp drop in the value of its mortgage-backed securities, those losses are unrealized and securities continue to generate cash flow for U.S. Central, according to Kathy Brick, chief financial officer. U.S. Central expects to recover the securities' full value. "These are high-quality performing assets. We are still receiving principal and interest payments each and every month on these securities," Brick told the newspaper. "They're still doing what we bought them to do." Some of the 26 corporate credit unions that are members of U.S. Central have reported similar declines in mortgage securities' values. If U.S. Central sold its mortgage securities now, said the paper, it would receive $2 billion less than it paid for them. However, U.S. Central has $2.6 billion in regulatory capital and abundant and deep sources of liquidity, making it unnecessary to sell any of the securities, Brick said. Because of the turbulent market, U.S. Central considers the drop in prices for securities to be temporary. The Star noted comments by the National Credit Union Administration, which said the corporate credit unions' liquidity position is strong. In the past, U.S. Central routinely sold securities to meet its short-term funding needs, but three years ago, it began developing alternative sources of immediate funding. Now, it can borrow from the Federal Home Loan Bank; use lines of credit at commercial banks; and issue its own commercial paper. Brick noted that U.S. Central is, "highly liquid. This just hasn't been an issue for us." Brad Miller, executive director of the Association of Corporate Credit Unions, told News Now yesterday that the corporates are diligently monitoring market conditions. "The corporates will continue their ongoing surveillance of the securities they own to ensure that their portfolios continue to perform throughout changing market conditions," he said. Miller added that NCUA continues to provide prudent oversight, and the agency has stated it is confident that corporates are taking the appropriate measures to weather the current market environment. He also pointed out that independent, third-party analysis confirms that mortgage-related securities held by corporates continue to "perform within original expectations and that full cash flow--principal and interest payments--will be received." Corporates have the willingness and ability to hold these securities until the markets recover or mature," Miller said. "For that reason the accumulated unrealized losses may never be realized in any material amounts." Miller also noted that all corporates within the Corporate Network continue to "maintain ample sources of liquidity to support the needs of their members." “This includes both advised and committed lines of credit from a vast array of financial institutions, member deposits, and cash flows being received as expected from their investment portfolios," Miller said.

NCUA webinar to highlight insurance protection

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ALEXANDRIA, Va.(8/15/08)—“Share Insurance 101”: The National Credit Union Administration (NCUA) Thursday announced its plans to offer a webinar of that name this Fall to provide credit unions with more information regarding share insurance protection. Date, time and other details of the informational session as they become available, the agency said in a release. The NCUA issued a letter to credit unions noting the webinar and highlighting resources available to educate members about the benefits of share insurance coverage offered by federally insured credit unions. In July, the federal regulator issued a media release confirming the secure position of the National Credit Union Share Insurance Fund (NCUSIF), and at its July open board meeting the NCUA’s chief financial officer announced that the NCUSIF has a record reserve level. The NCUSIF, which protects members against loss should a federally insured credit union fail, has an equity level of 1.24% and is expected by the agency to end the year at 1.28%. The NCUA points out that no member has ever lost a penny of federally insured funds held in a credit union. In its letter, the NCUA encourages credit unions to help educate their members about insurance protection and how members can structure their accounts to maximize share insurance coverage. The agency offers resources online to help, such as:
* Share Insurance Estimator, which allows members to estimate their amount of insurance coverage; * “How Your Accounts Are Federally Insured” brochure, which provides general information regarding share insurance coverage; * “Your Insured Funds” brochure, which provides detailed explanation of share insurance coverage and offers coverage examples; and * The “NCUA Increases Retirement Insurance Coverage” bulletin, explaining the separate coverage provided for certain retirement accounts.
The Credit Union National Association (CUNA) and the leagues also are working on behalf of credit unions to reassure their members about the safety of their deposits in the credit unions system and about the soundness of that system despite today's upheavals. For instance, CUNA recently distributed to each member credit union a special edition of Credit Union NewsWatch that encapsulates the many CUNA resources newly designed to help credit unions and their staffs address the public's questions and concerns about the safety of their money in trying economic times. The issue features a two-page "Primer on Share Insurance Coverage for Individual Credit Union Members," as well as a two-page spread on operational questions affecting share insurance coverage, geared toward credit union compliance staff. Also included in the special edition are:
* CUNA, Leagues Help CUs Spread Good News of Safety, Soundness; * NCUSIF Strong at Mid-Year, Says NCUA; and * CUNA, Leagues Get Word Out About CU Soundness.
CUNA members may use the resource link below to access the special CUNA resource. Also, see below for resource link to NCUA information.

CUNA urges party platform recognition for CUs

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WASHINGTON (8/15/08)—The Credit Union National Association (CUNA) is urging both Democratic and Republican parties to include credit union priorities in their party platform documents. CUNA also called attention to credit unions’ close work with Homes for Our Troops to build a home for a disabled veteran in each of the two major party convention cities. “We are proud to make a lasting contribution to the host cities and these American heroes in this historic election year. “It is representative of the effort credit unions make to serve their members every day,” wrote CUNA President/CEO Dan Mica in separate letters to the Republican Party Platform Committee and the Democratic Party Platform Committee, as those bodies worked to hammer out their final party platforms. The CUNA letter underscored the safety and soundness of the credit union movement and underscored that credit unions are well capitalized with an overall capital-to-asset ratio of 11.1%. About 70% of credit union home mortgage loans are held on credit union books, not sold off to the secondary mortgage market. “Credit unions have emerged largely unscathed from the subprime mortgage lending crisis because, unlike many banks, credit unions practice sound lending practices and were not tempted into making risky loans with the promise of big profits in return…Therefore, the plague of nonperforming home loans is a bank problem, not a credit union problem,” Mica pointed out to the platform builders. The CUNA letters also urged the parties’ to support the credit union tax status, an independent federal regulator for credit unions, and statutory changes needed to improve credit union service to members. “Credit unions remain trusted institutions, owned and controlled by their members.” Mica wrote, adding, “As you complete your work on the party’s platform, we ask that you consider including a statement recognizing the positive and vital role of credit unions in the lives of their members and financial services industry as a whole.”

Inside Washington (08/14/2008)

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* WASHINGTON (8/15/08)--The Federal Deposit Insurance Corp. (FDIC) has the opportunity to test its loan modifications strategy with IndyMac, according to industry observers. At the time of its failure, IndyMac serviced 740,000 mortgages worth $184 billion (American Banker Aug. 14). About 60,000 borrowers are behind on their payments by two months or more, said John Bovenzi, senior FDIC official and IndyMac chief executive. The agency placed a foreclosure ban on the loans IndyMac still owns to attract maximum value for the $15 billion portfolio, said Michael Krimminger, adviser for FDIC Chairman Sheila Bair. The FDIC plans to classify the loans based on their modification potential and then systematically restructure them, he said ... * WASHINGTON (8/15/08)--Larry Giesing, former president of Neighbors CU, St. Louis, is now treasurer for Rep. Russ Carnahan’s congressional campaign after retiring from the credit union (CourierNet Aug. 13). Carnahan (left) is a co-sponsor of the Credit Union Regulatory Improvements Act. Working on Carnahan’s campaign reinforces the importance of supporting credit union friends in elected office, Giesing told the Missouri Credit Union Association. (Photo provided by the Missouri Credit Union Association) ...