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Fannie Mae settles CU mortgage lawsuits

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WASHINGTON (8/31/11)--Fannie Mae has settled a pair of lawsuits brought by Medford, N.Y.'s Suffolk FCU and Dover, N.J.-based Picatinny FCU after those credit unions sought compensation for mortgages that were improperly sold to the government-sponsored mortgage firm. The terms of the settlements were not disclosed. Fannie Mae is also involved in separate cases brought by Garden City Park, N.Y.'s Sperry Associates FCU and Nutley, N.J.'s Proponent FCU, and those cases are still being litigated. Both cases are still in the discovery phase of compiling information. These and over 20 credit unions incurred a combined $160 million in losses when mortgage servicer CU National Mortgage fraudulently sold 189 of their mortgage loans to Fannie Mae and pocketed the money. The fraudulent sales were made between 2004 and 2009. Suffolk, Sperry Associates and Proponent are seeking a combined $60 million in damages from Fannie Mae. CU National Mortgage sold 58 of Picatinny’s mortgages, resulting in $14 million in losses, and Suffolk lost nearly $42.4 million when its mortgages were sold to Fannie Mae. CU National Mortgage and its parent U.S. Mortgage, based in Pine Brook, N.J., listed more than $200 million in debts to Fannie Mae and 19 credit unions when it filed for Chapter 11 bankruptcy in early 2009. Michael McGrath, president of the former mortgage companies, pleaded guilty in 2009 to stealing $139.6 million from 28 credit unions, and is currently serving a 14 year sentence. McGrath fraudulently conveyed the mortgages to Fannie Mae by forging allonges that he endorsed in his own name. His endorsement also included the initials "AVP," which may have been taken to mean associate vice president. An “allonge” is an attachment to a note that a party can add on for “endorsements,” such as signatures for transferring the note. One can make endorsements on the note itself, but McGrath used allonges instead to help hide his fraud. While CU National Mortgage's non-fraudulent transfers to Fannie Mae were made using Fannie Mae's electronic mortgage note transfer system, the fraudulent transfers were made using paper copies, with the attached allonges. The credit unions and Fannie Mae accused each other of failing to sufficiently scrutinize McGrath before the fraudulent mortgage transactions were made. Fannie Mae claimed that-–because of its size-–it was “commercially reasonable” for Fannie Mae not to conduct due diligence regarding the fraudulent transactions, and also that the credit unions should have warned the mortgage firm that McGrath, who was a member of a Fannie Mae advisory panel, was not an associate vice president of over two dozen different credit unions.

Cheney touts CU issues on iCNN Moneyi

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WASHINGTON (8/31/11)--In a CNN Money interview segment titled “Credit unions keep perks, banks won't,” Credit Union National Association (CUNA) President/CEO Bill Cheney underscored the differences between credit unions and banks and why credit unions continue to offer consumers the best deal in financial services. Anchor Poppy Harlow, noting that banks “across the board” are raising fees and cutting benefits to customers while credit unions are not doing the same to members, asked Cheney if the credit union approach is “a sustainable model.” The CUNA CEO answered “absolutely,” and explained that while banks are driven to deliver profits to stockholders, credit unions are responsible to their member-owners. Noting that he headed a credit union before he became a trade group CEO, Cheney said he knows first-hand that a credit union will do anything it can to help its members, especially in hard economic times. Cheney dispelled a notion that banks are hindered from providing consumer benefits because of their high capital standards. Cheney explained that, in fact, credit unions have higher capital requirements than banks, and fewer avenues to fulfill those requirements. While banks have alternative sources of capital, credit unions must rely on retained earnings to meet their higher requirements. Asked about the impact on credit unions of the Dodd-Frank financial reform law, Cheney responded that CUNA is concerned about and working to reduce the regulatory burden on credit unions. “We’ve been very vocal with the CFPB (Consumer Financial Protection Bureau) and leaders here in Washington,” he said. “If you want to simplify, you have to peel back the onion and get rid of old and conflicting regulations…so we’re not simply layering new regulation on top of old.” Also during the segment, Cheney made the case for an increase in the credit union member business lending (MBL) cap. He noted that, while banks claim there is low demand for small business credit, credit unions have witnessed a 30% increase in their MBLs. Cheney warned, however, that credit unions that are most successful in small business lending are coming up against an arbitrary MBL cap set in 1998. Cheney touted bills currently pending in the House and Senate that would increase the MBL cap to 27.5% of assets, up from 12.25%. If the higher cap becomes law, Cheney noted, credit unions—at no cost to the taxpayer—could infuse more than $13 billion in new funds into the U.S. economy and create up to 140,000 new jobs in the first year. Cheney concluded the interview by emphasizing that “credit unions really are a better deal.” Use the resource link below, to access the CNN Money video clip.

Compliance New employee rights notices needed soon

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WASHINGTON (8/31/11)--The majority of private-sector employers will need to publicly post notices of employee rights as detailed under the National Labor Relations Act (NLRA) in their offices beginning on Nov. 14 under a new rule announced by the National Labor Relations Board (NLRB) Tuesday. Although there was significant opposition from the business community, the NLRB finalized the rule, noting that “many employees protected by the NLRA are unaware of their rights under the statute” and adding that the rule “will increase knowledge of the NLRA among employees, in order to better enable the exercise of rights under the statute.” The new notice is similar to one required by the U.S. Department of Labor (DOL) for federal contractors. The NLRA notice must be posted “in conspicuous places where they are readily seen by employees, including all places where notices to employees concerning personnel rules or policies are customarily posted,” and a similar notice must be posted online in some cases. Translated versions of the poster are required in workplaces where 20% or more of employees speak a language other than English. Credit Union National Association (CUNA) compliance staff noted that since credit unions that are not specifically excluded from the NLRA’s definition of “employer” they will be subject to the rules. However, the notification requirement would not apply to agricultural, railroad and airline workplaces, and U.S. Postal Service outlets are also exempt from the requirements for the time being. CUNA noted that credit unions that already comply with DOL posting requirements will be in compliance with the new NLRB rule. For more on the new requirement, use the resource link.

Rep. Sherman CU issues high on priorities list

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WASHINGTON (8/31/11)--In a message sent to credit union representatives this week, Rep. Brad Sherman (D-Calif.) expressed his continued support for credit unions’ legislative priorities, including maintaining their not-for-profit tax status, relieving regulatory burdens, increasing the member business lending (MBL) cap, and easing access to supplemental capital. Sherman highlighted his continued support for the Small Business Lending Enhancement Act of 2011 (H.R. 1418), which would, in part, lift the MBL cap to 27.5% of assets, up from the current 12.25% limit. He underscored that the U.S. economy “needs more business loans, particularly to small businesses,” and that credit union representatives in his district tell him they “are ready to expand their member business lending.” He cited Credit Union National Association (CUNA) projections that the MBL cap increase would inject more than $13 billion in new funds into the U.S. economy, creating up to 140,000 new jobs in the first year of the cap lift. Increasing the credit union member business lending cap would not require an outlay of taxpayer money, CUNA said. Legislation to increase credit union MBL authority has been introduced both in the House and Senate, and Sherman pledged to “continue advocating for the government to simply get out of the way” of credit unions that are “eager to put their capital to work to help sustain” economic recovery. The legislator also said that credit unions “are too heavily regulated and unnecessarily restricted in the services that they may offer,” and added that he will continue his work to “ease the regulatory burden and other constraints on credit unions” to “enhance their ability to serve their members and their communities.” The National Credit Union Administration (NCUA) must “submit a proposal to congress that would allow credit unions to raise capital from alternative sources,” Sherman added, saying that credit unions “must be part of the discussion” as new capital standards for other financial institutions are developed. Sherman in his message also said he would “continue to work to preserve the credit union charter and will vigorously resist efforts to tax credit unions,” adding that he strongly believes “the not-for-profit, cooperative nature of credit unions and the services they provide to their members and communities amply justify their continued tax-exempt status.” “Credit unions have a special mission, and they play a unique role in meeting the credit and savings needs of consumers – especially those persons with low and moderate income,” he noted. For the full message to credit unions, use the resource link.

Inside Washington (08/30/2011)

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* WASHINGTON (8/31/11)--President Barack Obama will nominate Alan B. Krueger as a member of the Council of Economic Advisers (CEA). If Krueger is confirmed, he will be designated as chairman of the council, the White House said. Krueger is the Bendheim Professor of Economics and Public Affairs at Princeton University, where he has held faculty appointments in the Economics Department and Woodrow Wilson School since 1987. He is also the founding director of the Princeton University Survey Research Center. Krueger previously served as assistant secretary for economic policy and chief economist at the U.S. Department of the Treasury (2009-10) and as chief economist at the U.S. Department of Labor (1994-95). He was the chief economist for the National Council on Economic Education from 2003 to 2009 … * WASHINGTON (8/31/11)--A consumer credit-card complaint website created by the Consumer Financial Protection Bureau is not routing complaints properly. Jen Howard, a CFPB spokesperson, said some card issuers did not receive complaints filed through the agency’s website because of “browser compatibility issues” (Bloomberg Aug. 30). Howard said the CFPB will resolve the issue within weeks, though she did not say how many complaints were held up. The complaint system, required by the Dodd-Frank Act, was launched on July 21. Banks are concerned they will be blamed for unanswered complaints, said Richard Hunt, president of the Consumer Bankers Association …