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NCUA approves new NGN committee technical changes

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ALEXANDRIA, Va. (8/30/11)--Management and oversight of the National Credit Union Administration’s (NCUA) NCUA Guaranteed Notes (NGN) program will soon be handled by the NGN Securities Management and Oversight Committee, which was approved by NCUA board members during Monday’s August board meeting. The committee’s duties include monitoring the performance of the NGNs and their underlying collateral, ensuring the program’s compliance with legal and accounting requirements, and maintaining the NGN Program’s transparency to credit unions and other key stakeholders. The agency said the new committee is being established to minimize the NGN Program’s long-term costs. A total of $200,000 in 2011 funding was approved to set up the committee, which will consist of the directors of the NCUA’s Asset Management and Assistance Center, Office of Examination and Insurance, and Office of the Chief Financial Officer. Five NCUA staff members and various outside consultants will also work with the committee. NCUA Deputy Executive Director Larry Fazio will lead the committee at first. A total of $12.3 million will be spent on the committee in 2012, with $1.3 million going to cover employee pay and benefits costs, $6.5 million paying for consulting fees, and $2.75 million being used for vendor payments. A total of $815,000 will be spent on software and $730,000 will cover legal expenses. The agency stressed that the committee will not need approval for new funding, and that a separate assessment will not be needed to fund the group. All costs will be handled through the Temporary Corporate Credit Union Stabilization Fund, and committee funding has already been figured into the NCUA’s corporate resolution cost estimates. The NCUA said that the committee will perform its work for a minimum of 10 years. The agency during Monday’s august board meeting also proposed amendments and clarifying changes to its corporate credit union rule, Part 704. The proposed changes, which will be open for public comment for 30 days, amend NCUA regulations to exclude Central Liquidity Facility (CLF) stock subscriptions from the definition of net assets. The proposal also clarifies that violations of the weighted average life of a corporate’s assets are not subject to capital category reclassification. The proposal would require the preparation of investment action plans for such violations. These changes were made to “relieve regulatory burden where warranted” and ease access to liquidity, the NCUA said. For more on the NCUA’s August board meeting, use the resource link.

Corp. assessment set at 25 bp 2012 NCUSIF premium unlikely

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ALEXANDRIA, Va. (8/30/11)— Credit Union National Association (CUNA) President/CEO Bill Cheney said that the National Credit Union Administration’s (NCUA) 25 basis point (bp) Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment “came as no surprise” to credit unions, but nonetheless “represents a substantial hit” to their otherwise improving bottom lines. However, the news was not all bad for credit unions on Monday, as the agency also said that there is “no anticipated need” for a National Credit Union Share Insurance Fund (NCUSIF) premium to be charged in 2011, and an NCUSIF premium “will not be necessary in 2012” if the number of credit union failures maintains its current pace. NCUA board members during the NCUA’s August meeting approved a 2011 TCCUSF assessment of 25 bp of member shares as of the end of June, which would bring in $1.96 billion in funds to help cover the costs of corporate credit union stabilization. The 2011 TCCUSF assessment payment is due Sept. 27, and the NCUA said that credit unions should expense the assessment in September and report the full expense on their Sept. 30 call reports. Revenues from the 2011 TCCUSF assessment, along with money that the agency borrowed from the U.S. Treasury, will be used to pay off maturing medium-term notes principal and interest, the NCUA said. As a result of the TCCUSF assessment, about 800 credit unions will go from reporting positive net income to having net negative income. The net worth of 81 credit unions will fall below 7%, and 24 credit unions may have to prepare a prompt corrective action net worth restoration plan as a result of the assessment. However, on average, the net worth ratio of federally insured credit unions will drop only from 10.14% to 9.99%, the NCUA said. NCUA Chairman Debbie Matz said that the agency is mindful of the burden that these assessments place on credit unions, and NCUA staff said that while some credit unions would be negatively impacted, the NCUA felt it better to impose this size of assessment in 2011 when most credit unions are in a position to absorb the hit. The NCUA board emphasized that examiners will be directed to be flexible in determining the real safety and soundness impact of this corporate assessment on individual credit unions. NCUSIF and TCCUSF assessments for 2012 would likely total between 8 and 18 bp, the NCUA said. NCUA staff estimated that the 2012 TCCUSF assessment would need to collect $700 million, and anticipated an assessment of around 9 bp. NCUA analysts forecast that a 2012 NCSUIF assessment, if needed, would be a maximum of 7 bp, bringing in $607 million in NCUSIF funding. NCUA staff stressed that this projection is based on its most pessimistic estimate of NCUSIF losses. The total cost of remaining assessments has been reduced to between $1.9 billion and $6.2 billion after asset management firm BlackRock examined the financial status of the corporate stabilization fund, legacy assets held by the NCUA, and other data. The previous NCUA estimate for total corporate resolution assessments charged after 2011 was between $5 billion and $7.2 billion. BlackRock will also produce quarterly models detailing losses and cash flows of securitized assets held in NCUA Guaranteed Notes, and the agency said that these quarterly models would soon be reported on the NCUA’s homepage. For more on the NCUA board meeting, use the resource link.

NCUA addresses CU disruptions caused by Irene

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ALEXANDRIA, Va. (8/30/11)—In response to Hurricane Irene’s drawn-out crawl up the east coast over the weekend, the National Credit Union Administration (NCUA) has activated its disaster relief policy, and also has assured credit union members of the safety of their federally insured shares. The agency encouraged credit unions to do what they prudently can to recognize financial disruptions for both individuals and businesses in their areas. Actions to ensure credit is available or to adjust or alter terms on existing loans for customers affected by the storm may include:
* Extending the terms of loan repayments; * Restructuring a borrower’s debt obligations; and * Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
The agency alert also reminds federal credit unions that they may also provide assistance to other credit unions, their members, and non-members in areas affected by the disaster, under certain conditions. They include:
* Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals. These services can be provided under the authority to engage in charitable activities. Federal credit unions providing services on this charitable basis may not impose charges for services that exceed their direct costs; and, * Services to other credit unions that a credit union is authorized to perform for its own members or as part of its operations. This activity is part of a federal credit union’s incidental powers, so it may impose charges for these services.
The NCUA also reminded that its National Credit Union Share Insurance Fund (NCUSIF) is always backed by the full faith and credit of the U.S. government. The agency said that under its disaster policy, it will, where necessary, guarantee lines of credit for credit unions through the NCUSIF. The agency notice assured that its examiners will survey all credit unions and reschedule routine examinations where necessary. The agency’s examiners will also remain in close contact with credit unions to offer advice and assistance. “It is important for credit unions to report their status to NCUA in times such as this,” the agency reminded. Use the resource link below to read more of the NCUA’s disaster statement. Also, see related stories in this issue of News Now: CU movement takes stock of Irene's impact and Southeastern CUs reporting power outages from Irene.

Former CU worker in Mo. subject of prohibition order

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ALEXANDRIA, Va. (8/30/11)—Sandra Ann Jeffers, a former employee of P.C. Glassworks CU, in Sedalia, Mo. who has been convicted of embezzlement, has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA). Jeffers was sentenced to six months in prison, three years of supervised probation and ordered to pay restitution in the amount of $42,838.78, according to an NCUA prohibition order released Monday. 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 access NCUA enforcement orders online.

Inside Washington (08/29/2011)

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* WASHINGTON (8/30/11)--The Government National Mortgage Association announced Friday it will expand the parameters for loans to be repurchased from its trusts. They will include loans that have successfully completed a three-month trial payment period. The move was made to support the loss mitigation efforts of the Department of Veterans Affairs, Rural Development, and the Office of Public and Indian Housing, Ginnie Mae said. Modified loans that have successfully completed the modification process according to the insuring agencies’ requirements and have been permanently modified may be re-pooled. To be eligible for re-pooling, the permanently modified loan must be current as of the issuance date of the related security … * WASHINGTON (8/30/11)--The Federal Reserve Board will hold three public meetings on Capital One proposed acquisition of ING Direct, the Fed announced Friday. The Fed also announced that it is extending the period for public comment on the proposal through Oct. 12. The meetings will be held Sept. 20 in Washington, D.C., Sept. 27 in Chicago, and Oct. 5 in San Francisco. Lawmakers, including Rep. Barney Frank (D-Mass.), the lead Democrat on the House Financial Services Committee, had called for further exploration of the deal, which consumer advocates say could create another large bank whose failure could disrupt the financial system (News Now Aug. 19.) The original comment period expired Aug. 22 … * WASHINGTON (8/30/11)--A new Federal Reserve Board report disputes the claim that federal housing policy, embodied by the Community Reinvestment Act (CRA) and the affordable housing goals of the government sponsored enterprises (GSEs), may have caused the subprime crisis. The report, “The Subprime Crisis: Is Government Housing Policy to Blame?” was written by senior Fed economists Robert B. Avery and Kenneth P. Brevoort. “We find little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis,” the report says. “Our lender tests indicate that areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes.” Researchers compared mortgages between CRA-covered and non-CRA-covered institutions. It also compared certain geographic areas known to benefit from the CRA and GSEs housing goals with other areas. In both tests, no link was found between the two initiatives and higher proportions of troubled loans … * WASHINGTON (8/30/11)--New York Attorney General Eric Schneiderman has been removed from the negotiations by several states’ attorneys general with the largest mortgage servicers, raising doubts about a possible settlement. Andrew Sandler, a partner with BuckleySandler LLP, said state attorneys general are split in the negotiations American Banker Aug. 29). Without New York--and possibly other states not participating in a settlement--any deal has considerably less value to servicers, Sandler said. New York was among the states particularly hard hit by foreclosures. Any settlement that does not include New York would likely be much lower. The attorneys general are already considering settlement options that do not include New York …

NEW NCUA addresses CU disruptions caused by Irene

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ALEXANDRIA, Va. (8/30/11)—In response to Hurricane Irene’s drawn-out crawl up the east coast over the weekend, the National Credit Union Administration (NCUA) has activated its disaster relief policy, and also has assured credit union members of the safety of their federally insured shares. The agency encouraged credit unions to do what they prudently can to recognize financial disruptions for both individuals and businesses in their areas. Actions to ensure credit is available or to adjust or alter terms on existing loans for customers affected by the storm may include:
* Extending the terms of loan repayments; * Restructuring a borrower’s debt obligations; and * Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
The agency alert also reminds federal credit unions that they may also provide assistance to other credit unions, their members, and non-members in areas affected by the disaster, under certain conditions. They include:
* Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals. These services can be provided under the authority to engage in charitable activities. Federal credit unions providing services on this charitable basis may not impose charges for services that exceed their direct costs; and, * Services to other credit unions that a credit union is authorized to perform for its own members or as part of its operations. This activity is part of a federal credit union’s incidental powers, so it may impose charges for these services.
The NCUA also reminded that its National Credit Union Share Insurance Fund (NCUSIF) is always backed by the full faith and credit of the U.S. government. The agency said that under its disaster policy, it will, where necessary, guarantee lines of credit for credit unions through the NCUSIF. The agency notice assured that its examiners will survey all credit unions and reschedule routine examinations where necessary. The agency’s examiners will also remain in close contact with credit unions to offer advice and assistance. “It is important for credit unions to report their status to NCUA in times such as this,” the agency reminded. Use the resource link below to read more of the NCUA’s disaster statement.

NEW NCUA votes to assess 25bp for corporate fund

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ALEXANDRIA, Va. (8/29/11 UPDATED: 2:25 P.M. ET)--Credit unions will be assessed 25 basis points (bp) of their total insured shares to help cover corporate credit union stabilization costs, the National Credit Union Administration voted today. The agency expects it to bring $1.96 billion into the fund. The NCUA also noted that there will not be a National Credit Union Share Insurance Fund premium assessed this year. The 2011 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment was approved at the NCUA’s board meeting that started at 1 p.m. (ET). Payment is due Sept. 27. NCUA Deputy Executive Director Larry Fazio reported that the total remaining cost of the corporate resolution has been recalculated, with a new estimate lowering those costs to between $3.9 and $8.2 billion. Fazio earlier this year said the agency would have to charge between $7 billion and $9 billion in future assessments to pay for the remaining losses from troubled assets at corporates. He added, however, that he could not predict how long the NCUA would need to continue charging TCCUSF assessments. At the meeting today, the NCUA said it will soon provide quarterly reports on the loss projections through a new webpage on its website. Credit Union National Association (CUNA) Chief Economist Bill Hampel said the agency would likely need to collect about $1 billion a year until the full costs of corporate stabilization are paid off. That would represent an assessment next year of around 12 bp of insured shares. At the the NCUA’s August meeting today the three-member board also approved a 30-day comment period for proposed technical changes related to Part 704 on corporate credit unions, as well as maintenance of the NCUA Guaranteed Notes (NGNs). See tomorrow’s News Now for more.