ALEXANDRIA, Va. (8/17/12)--Federal credit unions may offer multi-featured loan (MFL) plans that use one umbrella loan agreement for multiple subaccounts with both open- and closed-end credit features, National Credit Union Administration (NCUA) Associate General Counsel Frank Kressman confirmed in a recent legal opinion letter.
The NCUA letter responded to a question from a Securian Financial Group/Minnesota Life Insurance Co. representative.
According to the letter, Securian offers a loan plan that is designed to provide federal credit unions with an alternative to multi-featured open-ended loan plans. These loan plans would include both open- and closed-end features.
"The plan, as a whole, is designed to be treated as open-end credit even though the plan has closed-end features," the NCUA letter noted.
Members would sign an umbrella loan agreement when they first agree to take part in the loan product. The loan products would allow credit unions to underwrite individual, closed-end advance requests where appropriate.
Borrowers can request open-end fund advances, such as lines of credit, or closed-end fund advances, such as auto loans, as needed, under the loan plans.
Open-ended credit lines may be suspended, or loan terms can be changed, if a borrower's creditworthiness deteriorates over the course of the loan agreement. In addition, borrowers must apply and be approved for any closed-end loans before funds can be disbursed.
Kressman said that these types of lending plans that combine open- and closed-end credit are not inconsistent with Regulation Z requirements, as long as proper disclosures are provided. However, he warned, some of these loan plans may not comply with certain state laws.
In those cases, such MFL plans "would not be a practical or legal option" for federal credit unions in given states.
For the full NCUA letter, use the resource link.
WASHINGTON (8/17/12)--Is the National Credit Union Administration's (NCUA) emergency liquidity proposal, released at last month's open board meeting, needed? If so, how could it be tweaked? Credit unions can answer these and other questions in a new Credit Union National Association (CUNA) comment call.
More than 6,000 natural person credit unions will lose access to the Central Liquidity Facility (CLF), which serves as a liquidity lender to credit unions in need of emergency funding, when U.S. Central Bridge Corporate CU closes in late October.
In anticipation of this closing, the NCUA has released a proposal that would require credit unions with less than $10 million in assets to maintain basic written emergency liquidity policies.
The proposal would also require federally insured credit unions (FICUs) with assets of $10 million or more to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations.
FICUs with assets of $100 million or more would be required to have access to a backup federal liquidity source for emergency situations. This backup liquidity could come from CLF membership or direct borrowing from the Federal Reserve's Discount Window.
In the comment call, credit unions can address whether the Federal Home Loan Banks should be included as sources of emergency liquidity and whether the NCUA should add other potential sources of emergency liquidity to the list of sources in its current proposal.
CUNA also asks if the NCUA's proposed asset-category divisions are appropriate, and whether different methods such as emergency liquidity ratios could be used to determine appropriate levels of liquidity preparedness.
The comment call asks if the NCUA should continue to maintain the CLF, and, if so, whether the role of the CLF could be expanded to offer non-emergency credit to credit unions.
The NCUA is accepting comments on its emergency liquidity proposal until Sept. 28. Comments should be forwarded to CUNA by Sept. 14.
WASHINGTON (8/17/12)--Tom Brewer, president of People's FCU, Nitro, W. Va., will address how financial services regulations have impacted his credit union's ability to lend and to serve its members during a Monday U.S. House Financial Services financial institutions and consumer credit subcommittee field hearing in Charleston, W. Va.
The hearing, which will be led by subcommittee leader Rep. Shelley Moore Capito (R-W. Va.), will focus on how regulations impact job growth. The subcommittee in a release said it also plans to explore the effects of excessively stringent federal bank examinations on the ongoing economic recovery.
Brewer will also discuss examination issues and how his credit union's compliance burden has grown during his time at the institution.
City National Bank President Charles Hageboeck, Pendleton Community Bank President William Loving, Mountaineer Mobile Homes Owner John Wohlever, and Mountain State Justice Inc. Attorney Sarah Brown are also scheduled to testify. The hearing is scheduled to begin at 11 a.m. ET.
The hearing is one of many held to gauge the local impact of federal financial regulations and federal regulator examinations. The subcommittee earlier this year held field hearings in San Antonio, Texas, and Cleveland, Ohio, on the impact of regulations and small financial institutions. Maria Martinez, president/CEO of Border FCU, Del Rio, Texas, and Robert Glenn, president/CEO of Air Force FCU, San Antonio, testified at the Texas hearing, and Stan Barnes, president/CEO of Canton, Ohio-based CSE FCU, testified in Cleveland.
WASHINGTON (8/17/12)--A group of 32 legislators have urged Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to delay remittance rule implementation until February 2015, and, in the meantime, to study how remittance regulation changes would impact consumers and financial institutions.
The CFPB's final remittance transfer rule, which is scheduled to take effect on Feb. 7, 2013, would require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes.
The Credit Union National Association (CUNA) and other finance industry groups joined Reps. Blaine Luetkemeyer (R-Mo.) and Yvette Clarke (D-N.Y.) last month to seek support for a remittance rule delay. House Financial Services Committee members David Schweikert (R-Ariz.), Bill Huizenga (R-Mich.), Francisco "Quico" Canseco (R-Texas), John Campbell (R-Calif.), Stevan Pearce (R-N.M.), Steve Stivers (R-Ohio), Frank Guinta (R-N.H.), Bill Posey (R-Fla.), Robert Hurt (R-Va.) and Randy Neugebauer (R-Texas) are among the 30 legislators that have joined Luetkemeyer and Clarke in urging the delay.
The legislators in the letter note that the CFPB's proposed remittance rules "are fundamentally misaligned with the primary way in which financial institutions conduct international transfers today." Consumer access to remittance transfers through credit unions, banks and broker dealers is "in serious jeopardy" as a result of the "nearly impossible compliance challenge that financial institutions must solve by next February," the letter added.
The CFPB's final remittance rules would "impose arbitrary and unworkable requirements" on international fund transfers, the legislators said. Any price certainty and transparency that is created by the remittance rule would come at the cost of higher prices, and reduced availability, they added. As a result, unbanked and underbanked individuals who use remittance services will be forced to rely on services provided by less-regulated financial entities. "Such an outcome is contrary to the important public policy goal of integrating these populations into the mainstream financial system," the letter noted.
The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year. The CFPB indicated at least 80% of credit unions that offer remittance services would be exempt.
CUNA remains very concerned about the safe harbor provisions and continues to encourage the CFPB to increase this safe harbor threshold. CUNA President/CEO Bill Cheney, in a recent discussion with Cordray, emphasized that the remittance rules have not taken effect yet and asked Cordray to discuss remittance concerns with credit unions.
- WASHINGTON (8/17/12)--Small mortgage servicers would be hardest hit by the Consumer Financial Protection Bureau's proposed new rules for mortgage servicing, which were designed for the largest firms. The proposed nine rules were a product of the $25 billion mortgage settlement agreed to earlier this year between regulators and the five largest servicers, including Banking of America, JPMorgan, Wells Fargo, Citigroup and Ally Financial (American Banker Aug. 16). But smaller servicers have thinner margins and will have trouble absorbing the cost required to carry out the requirements, observers say. The rules don't distinguish between small and large servicers, said Ed Delgado, a former senior vice president at Wells Fargo and now the chief operating officer at Wingspan Portfolio Advisors, a Carrollton, Texas, specialty servicer. Among the chief concerns for small servicers is the proposed requirement that servicers send borrowers periodic statements on residential loans and advanced notices when rates reset on adjustable rate mortgages. Terry Ryan, the president of Multi Financial Services in Tallahassee, Fla., estimated that requirement could account for 15% of his company's gross income …