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Late 2Q Call Reports: 75 CUs could face civil money penalties

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ALEXANDRIA, Va. (8/26/14)--The number of late call report filers in the second quarter dropped to 75 credit unions from 104 in the first quarter, but National Credit Union Administration Chair Debbie Matz said the goal still is full compliance.

Click to view larger image A breakdown of the second-quarter call report late filers, per National Credit Union Administration data. (CUNA Graphic)
The agency announced Monday that the late filers of second-quarter 5300 Call Reports now face potential civil money penalties. That number will likely decrease as the agency reviews each individual case and can waive civil money penalties if mitigating factors exist.

Four credit unions that filed late in the second quarter also filed late in the first quarter, and 63 of the late-filing credit unions have assets of less than $50 million. Fifty-five of the late filers are federally chartered credit unions. The NCUA said it will make public the names of late filers at a later date.

 After the agency reviewed the cases of the 104 credit unions that missed the first quarter call report filing deadline, 62 credit unions were ultimately fined, agreeing to civil money penalties totaling $57,750.

The NCUA reviews the cases to determine whether any of the late filers have mitigating circumstances that warrant a waiver of penalties. Those factors can include a credit union's filing history and other circumstances, such as a natural disaster, that prevented timely filing.

According to the agency, late filers should be notified in September of the penalties they face. Penalties are determined by three factors: size of the credit union, lateness in filing the call report and history of violations. All penalties will be sent to the U.S. Treasury, as required by the Federal Credit Union Act.

Starting in the first quarter of 2014, the NCUA announced the civil money penalties for late filers, which according to the agency, are meant "solely to deter late filing."

The NCUA has posted a video to its YouTube channel explaining the call report submission process.

Use the resource link below to access the video, as well as Matz's January letter to credit unions regarding the civil money penalties.

NEW: J. Mark McWatters sworn in as NCUA board member

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DALLAS (8/26/14, UPDATED 11:30 a.m. ET)--J. Mark McWatters was sworn in today as a National Credit Union Administration board member, the agency just announced. Outgoing board member Michael Fryzel performed the swearing in at Rep. Jeb Hensarling's (R-Texas) Dallas office. McWatters will join NCUA chair Debbie Matz and vice chair Rick Metsger to form the three-person board.

"It is my distinct honor and privilege to join the NCUA Board," said McWatters. "I wish to thank President Obama for submitting my nomination to the Senate, Senate Minority Leader [Mitch] McConnell for recommending my nomination to the President and the Senate for confirming my nomination. As a board member, I look forward to addressing the regulatory and administrative law challenges facing the credit union system as it continues to expand and evolve as a critical and fundamental component of the financial services industry."

Credit Union National Association interim President/CEO Bill Hampel said he and CUNA look forward to working with McWatters and meeting with him as soon as he is settled.  Priorities for discussion will include NCUA's risk-based capital proposal, examination concerns, the need for regulatory relief and the agency's budget. CUNA sent a letter to McWatters today welcoming him to the credit union system.

"Congratulations to Mark McWatters on becoming the newest member of the NCUA board today. We look forward to working with him, along with the other board members, on the key regulatory issues facing credit unions today," Hampel said.

Previously, McWatters was the assistant dean for graduate programs at Southern Methodist University's School of Law. He also served as a member of the Troubled Asset Relief Program Congressional Oversight Panel, and prior to that he practiced for over twenty-five years as a domestic and cross-border tax, corporate finance and mergers and acquisitions attorney.

McWatters received his J.D. degree from the University of Texas School of Law, a Master of Laws degree from Columbia University School of Law and an Master of Laws degree in Taxation from New York University School of Law. 

Each board member serves a staggered six-year term, with McWatters scheduled to serve until August 2019.

Ruben Gallego heads into Ariz. primary with CU support

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WASHINGTON (8/26/14)--Credit union-supported Ruben Gallego will attempt to move closer to a congressional seat in Arizona's 7th Congressional District primary today. The district, which consists of Phoenix and suburbs such as Glendale, is currently represented by Rep. Ed Pastor (D), who announced he will not seek re-election.

Gallego is a former Arizona state representative, who also served in the Marines with a deployment to Iraq in 2003.

He is endorsed by the Mountain West Credit Union Association (MWCUA), and has been the recipient of the maximum $5,000 donation from the Credit Union Legislative Action Council (CULAC). MWCUA joined with five Arizona credit unions, along with CULAC, to send out direct mailers to almost 20,000 households with credit union members.

"Ruben was a strong advocate and supporter of credit union issues while serving in the Arizona House of Representatives," said Austin De Bey, vice president of legislative affairs for MWCUA. "He recognizes the important role credit unions play in the financial marketplace, and we believe he will continue his support of issues that will help credit unions serve their members as a member of Congress."

Trey Hawkins, vice president of political affairs, Credit Union National Association, said the mailers could be a "significant factor" in the election, which has historically been one with low voter turnout.

Gallego is part of a six-person field in today's Democratic primary, and the district leans heavily Democratic. His closest challenger is expected to be ex-Maricopa County Supervisor Mary Rose Wilcox.

Debt relief scammers subject of FTC, CFPB complaints

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WASHINGTON (8/26/14)--Two federal agencies took action against debt relief companies that they claim used deceptive tactics to collect fees for debt settlement services. The Consumer Financial Protection Bureau (CFPB) announced an enforcement action against Global Client Solutions, while the Federal Trade Commission has asked a federal court to shut down a scam that claimed its debt relief programs were sanctioned and approved by the federal government.

Global Client Solutions, a debt-settlement payment processor, allegedly helped other companies collect tens of millions of dollars in illegal upfront fees from consumers, according to the CFPB complaint. The bureau has asked a federal district court to approve a consent order that would require the company and its two owners to halt all illegal activities and to pay over $6 million in relief to consumers, as well as a $1 million civil penalty.

According to the CFPB's complaint, since October 2010, Global Client Solutions processed tens of millions of dollars in illegal advance fees from tens of thousands of consumers. The company will be subject to monitoring by the CFPB and will be required to make reports to the CFPB to ensure their compliance.

According to the CFPB, the complaint is not a finding or ruling that the defendants have actually violated the law. The proposed court order has been filed with the Court for the Central District of California and will have the full force of law only when signed by the presiding judge.

Separately, the FTC asked a federal court last week to shut down a scam that targeted financially distressed Americans by pitching a phony debt relief and credit repair program on two websites, called the "Bill Payment Government Assistance Program." It claimed to offer up to $75,000 in debt relief and improved credit scored within 30 days to consumers.

According to the complaint, consumers were told that in exchange for an advance "service charge" of $900 to $1,100, the defendants would pay off the consumers' debts. Scammers would ask consumers for details of their outstanding debt, including account numbers, and then arrange bogus electronic payments that gave consumers the impression their debts were in fact being paid.

Once consumers paid the service charge via a money transfer service, the scammers would then reverse the payments made to consumers' bills, leaving consumers without the promised debt relief or improvements to their credit scores or limits.

The sites claimed the program was governed by the Recovery Accountability and Transparency Board, and the FTC alleges YouTube videos created by the scam's operators included an audio recording of Obama saying, "I approve this message."

Use the resource links below for more information.

John Magill to leave after 9 strong years at CUNA

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WASHINGTON (8/26/14)--Credit Union National Association interim President/CEO Bill Hampel praised John Magill, executive vice president for government affairs and special assistant to the president, who announced Monday he will leave his position at CUNA on Sept. 5.

Click to view larger image John Magill has been "a significant leader" at CUNA and will be "sorely missed," CUNA interim President/CEO Bill Hampel said Monday after Magill announced he would leave CUNA on Sept. 5.  Magill (left) is shown here discussing credit union matters with House Financial Service Committee Chair Jeb Hensarling (R-Texas). (CUNA Photo)
Hampel said of Magill, "He has been a significant leader in CUNA's advocacy team for almost nine years." Hampel added that Magill will be "sorely missed" and "we wish him well."

Magill, a 30-year veteran of Capitol Hill, joined CUNA in May 2006 as senior vice president of legislative affairs. He was promoted to the executive vice president post in July 2011.

During his years as an EVP, CUNA waged a battle to protect the credit union tax status as Washington policymakers considered tax code changes.

That effort was rewarded by the absence of credit union changes in a House Ways and Means Committee draft tax code reforms early this year. CUNA's pro-credit campaign included its groundbreaking "Don't Tax My Credit Union" social media blitz, which generated more than 1.3 million messages of support and garnered a Grassroots Innovation Award from the Public Affairs Council.

Also during Magill's tenure, CUNA has successfully advocated for a long series of credit union regulatory relief bills that have been introduced in the House and the Senate. Most recently, they include such legislation as the Senate's RELIEVE Act, to give credit unions parity to banks in a deposit insurance coverage issue; and, on the House side, such bills as one that orders a federal study the impact of the Federal Reserve Board's monetary reserve requirements, and a bill to ease some property appraisal requirements.

"It's been a fulfilling, rewarding experience and an important part of my life," Magill said of his time at CUNA. He noted that it is expected that a new CUNA president/CEO will be named in the next few weeks.

"So the timing is right for me to step into my next challenge in our nation's capital, where so many of us are fortunate to work and call home," he noted.

Magill said, however, credit unions folks should expect to him around from time to time as he continues to "help out on a few matters."

As executive vice president for government affairs and special assistant to the president, Magill provided strategic counsel on legislative and political issues while overseeing the day-to-day operations of those key advocacy areas. He also handled a number of administrative and other related matters inherent in the daily operations of the CUNA Washington office.

Goldman Sachs settles with FHFA for $3.15B in PLS suit

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WASHINGTON (8/26/14)--A $3.15 billion settlement was reached between the Federal Housing Finance Agency (FHFA) and Goldman Sachs in a lawsuit involving private-label mortgage-backed securities (PLS). The PLS were purchased by Fannie Mae and Freddie Mac between 2005 and 2007, and the FHFA alleged Goldman Sachs violated federal and state securities laws.

Under the terms of the settlement, Goldman Sachs will pay approximately $2.15 billion to Freddie Mac and approximately $1 billion to Fannie Mae.

According to an FHFA, the settlement effectively makes Fannie Mae and Freddie Mac whole on their investments in the securities at issue. As part of the settlement, FHFA, Fannie Mae and Freddie Mac will release certain claims against Goldman Sachs & Co. related to the securities involved.

The settlement also resolves claims that involved a Goldman Sachs security in FHFA v. Ally Financial Inc., et al.  FHFA previously settled claims against Ally Financial Inc. 

This is the 16th settlement reached in the 18 PLS lawsuits filed by the FHFA in 2011. Three cases remain outstanding.

Use the resource link below to access the full settlement.

CUNA: NCUA's securitization rule should allow CUs to securitize own loans

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WASHINGTON (8/26/14)--The Credit Union National Association submitted a comment letter to the National Credit Union Administration Monday regarding two proposed rules, one on assets securitization and the other on safe harbors. While CUNA generally supports both proposals, the trade group recommends several changes and clarifications for the asset-securitization proposal, which would allow credit unions to securitize their own loans.

The NCUA's proposal would also allow credit unions to create special purpose vehicles to hold the assets collateralizing the securities, which CUNA also supports.

"Such authority would allow credit unions to create issuing entities, which are necessary to insure investors that the underlying assets are not reachable by creditors should the credit union become insolvent," the letter reads.

However, the proposal as currently constructed limits the authority of a credit union to securitize loans it has originated. CUNA believes this limits the benefits of the proposed rule, and advocates the restriction be removed.

"The ability to purchase loans for securitization will give credit unions without enough originations of a particular loan type increased opportunities to package their own loans," the letter reads. "In addition, credit unions may hold loans that they have purchased for other reasons prior to contemplating sponsoring a securitization. Credit unions should be able to include these loans in a securitization transaction for risk management."

The letter goes on to say that even if the agency does not allow other loans to be purchased for securitization, it should permit a credit union to purchase loans that it re-underwrites to be part of a securitization pool.

CUNA notes that the current proposal does not provide for those circumstances, and at a minimum, it should be clarified to state that such an action is permissible.

In addition, the rule does not address the role of credit union service organizations (CUSOs) in asset securitization. CUNA believes that loans originated by a credit union's CUSO should be included with loans the credit union securitizes through a special purpose vehicle that is not the CUSO.

"[The proposed rule] stated that securitization is not a pre-approved CUSO activity but we think it should be, both in originated loans that could be securitized by a credit union or allowing CUSOs to act as sponsors," the letter reads. "NCUA should also address whether multiple credit unions could utilize a CUSO to securitize loans and whether credit unions can participate with banks to facilitate securitizations."

CUNA's comment letter also addresses the NCUA's proposal safe harbor rule, which would provide a meaningful safe harbor irrespective of the legal characterization of the transfer. CUNA supports the NCUA's safe harbor rule as proposed.

Use the resource link below to access the proposed rule and CUNA's letter.