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Inside Washington (08/31/2009)

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* ALEXANDRIA, Va. (9/1/09)—The National Credit Union Administration (NCUA) has sent out a follow-up communication to its fraud alert last week regarding a bogus Letter to Credit Unions that itself masqueraded as an NCUA fraud alert. The false alert, the NCUA said, appears to be confined to the activity of a single credit union. According to the agency, as part of an internal "system penetration" test, a credit union created a facsimile of an NCUA Fraud Alert. “This was an unauthorized and improper use of the NCUA logo, and also included a falsified signature of then-Chairman Michael Fryzel,” NCUA said. The bogus alert was forwarded to the NCUA and that prompted the issuance of the Aug. 25 Fraud Alert. Credit unions are not authorized to create facsimile documents bearing NCUA logos or signatures, or to improperly represent communications from NCUA, even during the legitimate conduct of business such as a computer security assessment. The NCUA said it takes any type of security breach very seriously. "We also place a high priority on making federally insured credit unions aware of any illegal, fraudulent or deceptive activities that are frequently aimed at financial institutions. NCUA vigilance in this important area will continue, as will our efforts to make certain that credit unions take all proper precautions to protect sensitive member information and maintain financial security.”… * WASHINGTON (9/1/09)--Taxpayers should start to see profits as big banks repay their government bailout funds (The New York Times Aug. 31). Eight of the nation’s largest banks have completely repaid their bailouts, amounting to about $4 billion in profits, the newspaper said. The government also earned profits of $1.4 billion from Goldman Sachs, $1.3 billion from Morgan Stanley and $414 million from American Express when they repaid their bailouts. Bank of New York Mellon, State Street, U.S. Bancorp, BB&T, and Northern Trust also helped bring profits ranging from $100 million to $334 million. The repayments represent a small portion of the government’s financial rescue of banks and other companies, but taxpayers could collect more profits as banks repay their debts. When the bailout funds were issued, taxpayers were told they would make a modest return on the bailout funds. Critics had warned taxpayers, saying they may not reap any profits if some banks could take years to repay the money ... * WASHINGTON (9/1/09)--The Federal Deposit Insurance Corp. (FDIC) has agreed to guarantee $80 billion in loans and other assets from more than 50 deals, or “loss shares,” to encourage banks to buy up assets from their failed counterparts. The exposure is about six times the amount remaining in the FDIC Deposit Insurance Fund, according to The Wall Street Journal (Aug. 31). The government has shifted into cleanup mode from financial crisis mode, though its financial burden is not receding, the newspaper said. The FDIC has paid $300 billion so far to banks under loss-share agreements ... * WASHINGTON (9/1/09)--The Federal Deposit Insurance Corp. (FDIC) said Friday that it is extending the “de novo” period for newly insured financial institutions to seven years from three years for exams, capital and other requirements. Typically, newly insured financial institutions are subject to higher capital requirements and more examinations during a de novo period. The FDIC also must approve material changes in business plans for the institutions during the first seven years of operation. The changes address the elevated risk that newly insured institutions pose to the FDIC Deposit Insurance Fund, the agency said ... * WASHINGTON (9/1/09)--The Securities and Exchange Commission (SEC) has been historically slow in its oversight of credit-rating agencies, according to a report by SEC Inspector General David Kotz. In 1994, the SEC began issuing concept releases, conducting exams, issuing reports, conducting hearings and proposing regulations. However, it didn’t adopt any regulations regarding nationally recognized statistical rating organizations. There also are certain instances of non-compliance with requirements of the Rating Agency Act, the report said. However, Kotz stated that the SEC has identified improving the quality of credit ratings as a priority ...

Free Choice members served now by Trumark Financial

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ALEXANDRIA, Va. (9/1/09)-- Trumark Financial Credit Union, a $1.080 billion-asset credit union in Trevose, Pa., will now serve the former members of Free Choice FCU of Feasterville, which was liquidated by the National Credit Union Administration (NCUA) Friday. The NCUA said Free Choice was liquidated to protect member assets while addressing operational issues within the credit union because of a deteriorating financial condition. With shares purchased and assumed by Trumark Financial, former Free Choice members are guaranteed full member-owner rights at TFCU, the NCUA noted in its announcement. Prior to the purchase and assumption, Trumark Financial served 91,000 members in neighboring counties in southeastern Pennsylvania. Chartered in 1955, the liquidated Free Choice had assets of approximately $326,000, and served more than 400 members from 20 select groups.

Joint liquidity rules redundant for CUs says CUNA

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WASHINGTON (9/1/09)—New joint federal regulatory guidance on funding and liquidity risk management makes sense at for banking organizations, but would only be redundant to existing rules for credit unions, the Credit Union National Association (CUNA) said in a comment letter submitted Monday. The CUNA letter addresses proposed interagency guidance issued the National Credit Union Administration (NCUA), Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of Thrift Supervision. The proposed guidance is intended to clarify and summarize principles of sound liquidity risk management previously issued by the agencies. CUNA adamantly supported “robust, ongoing liquidity risk management at all credit unions” in its letter, but delineated a number of reasons why the NCUA should not go forward with the proposed guidance. For instance, CUNA noted, sound liquidity risk management policies and processes already are well covered in the agency’s Examiner’s Guide, “Chapter 13- Part 3, ALM-Liquidity Risk.” All of the key components of the guidance are addressed sufficiently in the examination procedures, including adequate sources of liquidity, contingency planning in the event of liquidity problems, monitoring and reporting on liquidity," noted Mary Dunn, CUNA senior vice president and deputy general counsel, who signed the letter. CUNA also wrote:
* The NCUA has not provided a sufficient rationale for new requirements that would be imposed on federal credit unions; * The proposed guidance attempts to impose uniform liquidity risk management procedures on all financial institutions regardless of size or charter type, while CUNA believes that the proposed guidance is more appropriate for very large banks; * Regarding corporate credit unions, the NCUA already is reviewing the structure of the corporate system and, CUNA pointed out, “any additional requirements for corporate credit unions in this area should be addressed in the context of that review.”
The CUNA letter concluded that it is better for the agency not to go forward with the proposal, but added if NCUA feels it is necessary to address liquidity risk issues, it should develop a Letter to Credit Unions that focuses on specific problems and addresses steps credit unions can take to address them under the agency’s current liquidity risk management requirements. Use the resource link to read CUNA’s complete comments.

FinCEN offers guidance on new CTR exemption rule

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WASHINGTON (9/1/09)—Responding to a Government Accountability Office (GAO) recommendation for more guidance to help financial institutions determine whether a member or customer is eligible for exemption from currency transaction reporting requirements, the Financial Crimes Enforcement Network (FinCEN) Monday issued new Bank Secrecy Act direction. The FinCEN guidance provides examples and answers to commonly asked questions regarding a final rule that went into effect on Jan. 5, and which made the following changes to the CTR exemption system:
* Elimination of designation and annual review for most Phase I customers; * Financial institutions may now designate an otherwise eligible non-listed business customer/member for exemption if it has conducted five or more reportable transactions in currency within a year (previously, eight or more reportable transactions were required); * The waiting time for Phase II eligibility was decreased from 12 months to two months or less than two months if a risk-based analysis of the member's transactions was conducted; and * Biennial renewals for Phase II exemptions were eliminated.
FinCEN’s new guidance includes an easy-to-read chart to help financial institutions establish when a member or customer can be exempt. Use the resource link below to access more information.

NCUA sets Town Hall meetings

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ALEXANDRIA, Va. (9/1/09)—Chairman Deborah Matz of the National Credit Union Administration (NCUA) announced three upcoming Town Hall meetings to discuss corporate credit union and other credit union issues. The meeting schedule:
* Tuesday, Sept. 15, St. Louis, Mo.; * Wednesday, Sept. 30, National Harbor, Md., which is in the Washington, D.C. area; and * Monday, Oct. 5, San Diego, Ca.
In her announcement Matz said, “These Town Hall meetings will provide an invaluable and important venue to have genuine dialogue about a variety of critical issues. “The dislocations experienced by the financial markets have had a significant effect on both corporate and natural person credit unions, and it is incumbent on NCUA and the industry to come together in a forward-looking and reasoned manner to find solutions. “ The ongoing corporate rulemaking is but one element of this process; I am hopeful that, working together, we can turn the broader challenges into a catalyst for changes that will set a course for an even brighter future for the credit union industry.” Use the resource links below to access registration.

CUNA confirms NCUSIF saying premium only around 0.15

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WASHINGTON (8/31/2009)--CUNA has confirmed with NCUA that it is still saying credit unions will only be charged a premium of about .15 percent this fall. CUNA made the confirmation after other incorrect reports began circulating on the Internet today (Friday) that an extra NCUSIF premium or special assessment is under consideration by the agency. In June, NCUA indicated that federally insured credit unions should expect a premium assessment of around .15 percent (or higher, depending on NCUSIF costs) that would likely be approved by the NCUA Board in September. The agency is planning no separate insurance assessment in addition to the one it has already indicated credit unions will be charged. "In light of this, our reading of the situation is that credit unions can still expect just the roughly 15 basis point premium to be levied by NCUA next month," said CUNA Chief Economist Bill Hampel. CUNA continues to monitor the situation and will keep credit unions updated on all agency actions involving the NCUSIF.

Some guidance on examiner flexibility for CARD Act issued by NCUA

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WASHINGTON (8/31/09)--Noting that some credit unions may have technical difficulties in complying with the CARD Act, NCUA Board Chairman Debbie Matz today (Friday) issued a statement citing the "need for examiners to work with credit unions on a case-by-case basis." "The amount of time necessary to come into full compliance will likely vary, depending on the type of credit arrangements a credit union offers its members and, in many cases, the cooperation of third party vendors in revising billing procedures and statements," Matz stated. "All credit unions are expected to come into full compliance as early as reasonably possible, and to demonstrate their efforts to do so. "In the interim, credit unions should follow the alternative allowed by the Federal Reserve. Like any regulatory compliance matter, examiners will review credit union efforts to achieve compliance." The NCUA Board chairman added that "In no event can credit unions impose a late fee or change terms except as permitted by the Credit CARD Act and the Federal Reserve's regulation." Under the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) and the Federal Reserve Board's interim final rule, financial institutions must mail or deliver periodic statements for open-end consumer credit plans at least 21 days before the payment due date or lose the ability to treat the payment as late if it is made after the 21-day period. Congress established an Aug. 20, 2009, effective date for the requirement. However, the Federal Reserve has stated that for a "short period of time" a creditor may technically comply by prominently disclosing elsewhere on or with the periodic statement that the consumer's payment will not be treated as late for any purpose if received within 21 days after the statement was mailed or delivered. Matz' statement acknowledged that the Fed's failure to define "short period of time" has "caused credit unions and their representatives to ask for guidance as to the duration of the short period of time for which credit unions may use this alternative." Matz' statement today (Friday) was intended to provide some additional guidance. CUNA Senior Vice President of Regulatory Advocacy and Deputy General Counsel Mary Dunn described the NCUA Board Chairman's statement as "a useful step in the right direction" which "provides more indication of the agency's awareness of credit unions' compliance hurdles." She said CUNA will continue its efforts with NCUA to ensure examiners provide needed flexibility to credit unions that are making good faith efforts to comply. Earlier this month, CUNA sent a letter to the agency leadership urging it to instruct examination staff to be flexible as credit unions struggle to comply with aspects of the CARD Act. "There is no question that the CARD Act is inflicting a significant toll on the credit union system," CUNA President and CEO Dan Mica wrote. "In recognition of this and the range of other issues credit unions are facing, including the sagging economy and funding for NCUA's corporate stabilization program, we urge you to direct NCUA examiners to work with credit unions as they reasonably determine what is their best approach for compliance."

Matz NCUA future framed by big issues

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WASHINGTON (8/31//09)—The agenda for the September National Credit Union Administration (NCUA) open board meeting, the first at which Deborah Matz will be chair, may not have been set yet—but some glimpses of the new chairman’s future are clear. One of the biggest and most pressing issues facing the agency right now is its effort to stabilize and restructure the corporate credit union system—a plan that recently generated around 500 public comment letters. The NCUA board members have been careful not to indicate any preconceived notions about how the restructuring should look and they have repeatedly encouraged credit unions to send their ideas for a revamping plan. Matz seemed to mirror this approach at her confirmation hearing in July when the subject of corporate credit unions was raised. Matz noted simply that during her previous tenure on the NCUA board, she voted against a 2002 corporate credit union rule because she believed it did not adequately address her concern regarding an undue concentration of risk. Risk concentration is an area of interest to other board members as well, and to a back drop of the nation’s hard-hit economy, which is just sending up shoots of recovery, it is likely to see much debate in public and in private as Matz moves the corporate plan forward. Matz assumes chairmanship of the NCUA just as the U.S. Congress returns to Washington after its month-long summer district work session. While she will be navigating her agency through such regulatory considerations as compliance with new Credit CARD Act rules (see related story: Some guidance on examiner flexibility for CARD Act issued by NCUA), the Obama administration’s efforts for overall financial institution regulatory reform will certainly also be on the board members’ minds. Specifically, Matz assuredly will be closely monitoring the possible development of a Consumer Financial Protection Agency and considering whether the NCUA will pursue Michael Fryzel’s plan to establish its own consumer panel within the auspices of the agency. Other legislative issues that will help compose the framework within which the federal regulator operates in the near term are expanded member business lending, as proposed in a bill introduced by Rep. Paul Kanjorski (D-Pa.), and, of pivotal interest to credit unions, any actions to allow supplemental capital. After the agency’s customary August break for open board meetings, Matz will be joining board members Fryzel and Gigi Hyland for a public meeting on Sept. 24.

Compliance Due diligence a must when working with NCUA

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WASHINGTON (8/31/09)--Credit unions should take care to use the same due diligence when dealing with the National Credit Union Administration or other regulators that they take when dealing with everyday vendors, attorney Christopher Pippett advised in the August issue of Credit Union Magazine. To ward off potential letters of understanding and agreement (LUA) from regulators, Pippett advised that credit union officials should push back against regulators if they do not agree with a course of action or believe that they can meet a deadline imposed by a certain timetable. In the event that a LUA is issued, credit unions should seek legal advice before signing it, and should never simply sign a LUA when it is first presented by a regulatory examiner. Further, the attorney that is representing the credit union in the event of a LUA should be familiar with credit union law, Pippett said. While reviewing the LUA, credit unions should discuss reasonable alternatives that could address the examiners concerns and evaluate the prospective timeline for any recommended actions. Credit unions should also ensure that the document reflects steps that the credit union has taken to address the regulator’s concerns. The LUA should not be made public, and should contain a definite end date. Credit unions should also make sure to communicate with the regulator as the agreement is produced and should continue that sense of communication as the LUA is executed, Pippett added. For the full story, use the resource link.

Inside Washington (08/30/2009)

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* WASHINGTON (8/31/09)--One part of the Obama administration’s regulatory reform plan--the elimination of national bank preemption--has gone largely unnoticed by lawmakers. But many financial institutions say the elimination would have a significant impact. The provision would allow states to act independently and separately, “balkanizing” the industry, according to Howard Cayne, Arnold & Porter partner. Comptroller of the Currency John Dugan has rallied against preemption, but it’s not clear if his congressional counterparts agree (American Banker Aug. 21). However, Rep. Barney Frank (D-Mass.) wants the provision to stay, arguing that the Comptroller of the Currency overstepped its bounds in 2004 when it adopted rules codifying its preemption authority. Community banks have fought against the proposed consumer protection agency because it could set rules so strict states won’t go beyond them, while larger banks have opposed the preemption. The Senate may be the best place for the banking industry to fight the provision. Mark Calabria, former Republican committee aide and Cato Institute director of financial regulations, suggested Democrats could make a trade-off with the industry by allowing the preemption and detailing stronger consumer protection rules ...

Hyland NCUA coordination with state rulemakers must continue

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ALEXANDRIA, Va. (8/24/09)--National Credit Union Administration (NCUA) board member Gigi Hyland late last week said that the “strong, collaborative working relationship” between state credit union supervisors and the NCUA “must continue” as regulators and credit unions “work through these difficult economic circumstances.” Speaking before the National Association of State Credit Union Supervisors (NASCUS) State System Summit, Hyland also encouraged credit union representatives to closely review and comment on upcoming changes to the rules that govern corporate credit unions, which are widely expected to be released this fall. Hyland, according to an NCUA release, also said that she is planning to present a white paper that would lay out the qualities that supplemental capital sources must have in order to “align with the credit union cooperative financial business model.” Hyland is planning to present the paper to the NCUA Board for consideration, according to the release. Hyland also discussed the recent changes to the Central Liquidity Facility and legislation aimed at addressing the member business lending cap. (See related story: NCUA's Hyland Suggests Phase in of MBL Authority, Aug. 21.)

CDFIs to get enhanced assistance training

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WASHINGTON (8/24/09)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund on Friday announced that it is expanding its technical assistance and training endeavors with CDFIs in an effort to help them better “deliver financial products and services to underserved communities nationwide.” To complete the planned expansion, the CDFI Fund has issued a Request for Proposals (RFP) to collect bids from contractors that could aid the CDFI Fund in its future initiatives. The new Capacity-Building Initiative will provide increased specialized technical assistance and also will provide training resources, which will cover issues related to affordable housing, business lending, portfolio management, risk assessment, foreclosure prevention, training in CDFI business processes, and assistance with liquidity and capitalization challenges, the release added. The CDFI will also offer “direct on-site technical assistance and individualized capacity-building plans” through the Capacity-Building Initiative. CDFI Fund Director Donna Gambrell said this type of expansion would “not only ensure that the CDFI Fund is best positioned to lead CDFIs through the financial crisis, but also position the entire CDFI industry to expand their lending activities and spur economic growth in distressed communities.” Under the RFP, the CDFI Fund specifically requests contractors that can complement existing foreclosure prevention programs by helping identify resources and best practices related to foreclosure prevention, including the development of financial products and the implementation of post-purchase housing and foreclosure prevention counseling programs. The CDFI Fund is also seeking contractors with expertise in risk assessment, liquidity, and capitalization. Eligible contractors will be hired in fall of this year, and technical assistance and training should be made available to CDFIs by spring 2010. For the full CDFI Fund release, use the link.

CUNA asks Fed to clarify short compliance period

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WASHINGTON (8/24/09)--The Federal Reserve Board has authority to provide grater relief to credit unions from the requirements of the 21-day rule under the new Credit CARD Act a they apply to open end credit, the Credit Union National Association (CUNA) has again advocated in a comment letter on the agency's interim final rule it filed Thursday, August 20--the effective date of the interim final rule. In light of the "formidable obstacles" to compliance that credit unions are facing, CUNA has urged the Board "to do what it has done in the past to facilitate compliance with Truth-in-Lending (TILA) requirements -- invoke its authority under Section 105 of TILA to limit the scope of these requirements or provide more time to comply, " CUNA Senior Vice President and Deputy General Counsel Mary Dunn wrote to the Board. The comment letter is the most recent of a series of CUNA communications with Board officials following the law's enactment. Under the interim final rule, creditors must adopt reasonable policies and procedures to ensure periodic statements for open-end accounts are mailed or delivered to borrowers at least 21 days before the payment is due. Otherwise, if the payment is made after that time frame, the creditor may not treat it as late for any purpose, including charging a late fee, reporting the account as delinquent to credit bureaus, or imposing a penalty interest rate. While the Board has declined to provide the relief CUNA urged, CUNA's letter notes that the Board has allowed credit unions "for a short period of time" to prominently disclose on or with the periodic statement that the member's payment will not be considered late if received within 21 days after the statement is mailed or delivered and that this alternative will facilitate compliance for some credit unions. Dunn urged the Board to clarify that "short period of time" is "the amount of time it takes for a credit union to be in compliance with the provisions of the rule, as long as the credit union is proceeding in good faith to meets its obligations within a reasonable amount of time." This time period will likely vary among credit unions and could be up to six months or longer, CUNA said. "In any event, we urge the Board to refrain from any action that would undermine this reasonable interpretation, " Dunn wrote. The letter also encouraged the Board to provide guidance on permissible collection activates and to clarify that permissible, legal actions to collect an underlying debt would not be in violation of the final rule. The Fed should also clarify whether or not posting periodic statements on the financial institution's website at least 21 days before the payment is due will be considered sufficient if consumers choose to manage their accounts electronically. The rule does not currently state whether or not a separate email that notifies the consumer that his or her account statement has been posted is needed to comply with the rule, and CUNA also sought clarification on this matter. CUNA further argued that the 21 day rule should not apply to short-term open-end lending products offered by some credit unions. CUNA will file a second comment letter to detail other concerns regarding the interim final rule, such as the application of the 45-day change-in-terms notice requirements, in the next few weeks. CUNA also continues to work with key congressional offices to narrow the reach of the 21-day rule or extend the compliance date. To view the most recent comment letter in full, use the resource link.

Inside Washington (08/27/2009)

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* WASHINGTON (8/24/09)--The U.S. is only beginning to emerge from a recession, and more challenges lie ahead, Federal Reserve Board Chairman Ben Bernanke said at a symposium in Jackson Hole, Wyo., Friday. The role of liquidity in systemic events indicates that a more systemwide or macroprudential approach to regulation also is needed, he said. Bernanke also discussed the nation’s financial crisis and regulators’ response to it, re-iterating the central bank’s work to prevent the failure of more financial firms. “As severe as the economic impact has been, however, the outcome could have been decidedly worse. Unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year monetary, fiscal and financial policies around the world have been aggressive and complementary,” he said ... * WASHINGTON (8/24/09)--Small businesses won a record $93.3 billion in federal prime contracts for fiscal year 2008, an increase of almost $10 billion from 2007, the Small Business Administration said last week. Small disadvantaged businesses, women-owned businesses and service-disabled veteran-owned businesses increased their share of federal contracting dollars by at least $1 billion to $3 billion ...

NCUAs Hyland Suggests Phase in of MBL Authority

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WASHINGTON (8/24/09)— NCUA board member Gigi Hyland yesterday told state regulators she would prefer to see a regulatory phase in of increased authority for credit unions to make member business loans. Addressing the National Association of State Credit Union Supervisors System Summit in Boston, Hyland indicated NCUA has the authority to implement any newly granted MBL authority in stages and should do so. Hyland said these were her own views and the agency has not taken an official position. Reacting to Hyland’s comments, CUNA President Dan Mica recognized NCUA has these regulatory tools and emphasized that Hyland’s comments should not be construed as lessening the need for Congress to pass the expanded MBL authority in H.R. 3380, the bill introduced by Reps. Paul Kanjorski (D-PA) and Ed Royce (R-CA) that would raise the current 12.25% of assets MBL cap to 25%. Mica called the legislation “an important step” that will better enable credit unions to help their members with small businesses and help turn around the economy. "We would like to see the cap taken off member business lending by credit unions because it will help the economy and because credit unions have proven themselves responsible lenders, Mica added. Board member Hyland, like the other members of the NCUA board, " is clearly performing her due diligence as a regulator to ensure that credit unions do the job right when they begin making more business loans,” Mica added.

SBA to expand microloan programs

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WASHINGTON (8/21/09)--Recent funding additions related to the American Recovery and Reinvestment Act have allowed the U.S. Small Business Administration to expand its microloan program, increasing access to capital for small businesses nationwide. In a Thursday release, the SBA said that it will focus on “adding new lenders and encouraging entrepreneurs to seek out SBA-backed microlenders to finance their businesses.” The SBA has “exhausted” its reserves of $20 million in loans and $20 million in technical assistance funds and will now use the additional $50 million in loan funds and $24 million in technical assistance funds, according to the release. SBA Administrator Karen G. Mills said that the additional resources will allow the SBA to “put more entrepreneurs and small business owners in a position to succeed and create jobs that will in turn help drive our nation’s economic recovery.” The SBA has approved eight new microloan applications following the passage of the Recovery Act and will disburse $10.7 million in Recovery Act funding through microloans. Durham, N.C.-based Self Help CU is one credit union that participates in the microlending program. Applicants who wish to participate in the program must: be organized as a non-profit organization, quasi-governmental economic development corporation, or an agency established by a Native American Tribal Government; have a minimum of one year of experience providing technical assistance to borrowers; and must have made and serviced short-term fixed-rate loans of not more than $35,000 to newly established or growing small businesses for at least one year, according to the SBA.

Fed adjusts mortgage disclosure triggers

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WASHINGTON (8/21/09)--The Federal Reserve Board announced that the dollar amount of points and fees that trigger additional disclosures and prohibitions under the Truth in Lending Act for some mortgage loans will be reduced to $579 for 2010. The so-called “trigger” for 2009 is currently $583. The disclosures and prohibitions will now apply when total points and fees on a loan exceed $579 or 8% of the loan amount, whichever is greater. The Fed adjustment, which will become effective Jan. 1, will not affect mortgage rules for “higher-priced mortgage loans,” as adopted by the Fed in 2008. Use the resource link below to review the board's complete notice and a Credit Union National Association rule analysis on the final rule.

Inside Washington (08/20/2009)

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* WASHINGTON (8/21/09)--The Washington Credit Union League board honored National Credit Union Administration (NCUA) Chairman Michael Fryzel during the league’s August meeting. The league recognized Fryzel for addressing complex academic challenges in managing the corporate stabilization plan, his efforts to affirm the need for an independent credit union system and separate credit union charter, and for fulfilling his role as chair during an extraordinary time in credit union history. “Fryzel showed an ability to act at a time of crisis when other federal agencies were criticized for inaction. This advances the policy logic that supports the continuance of an independent NCUA, long into the future,” said John Annaloro, Washington league president/CEO ... * WASHINGTON (8/21/09)--Sen. Bob Corker (R-Tenn.) is becoming a powerful member of the Senate Banking Committee and is in line to become the No. 4 Republican on the committee next Congress, according to Brian Gardner, analyst with KBW Inc. He said Corker has rapidly ascended to relevance beyond his rank. Some of the issues the panel is facing include financial regulatory reform and the creation of a consumer protection agency. Corker does not favor the idea of creating a new agency and also doesn’t agree with the administration’s proposed requirement to force banks to offer “plain vanilla” products. Consumer protection is important, but the way it’s been presented is “bizarre,” Corker said ... * WASHINGTON (8/21/09)--The Federal Deposit Insurance Corp. (FDIC) is set to meet Wednesday to discuss two proposals regarding risk-based capital guidelines--final statements of policy regarding qualifications for failed bank acquisitions and extending the transaction account guarantee program. The proposals have been debated by FDIC extensively. Private-equity firms oppose the proposal that would force them to keep a failed bank for three years to satisfy capital requirements. The agency said it could lessen some requirements, including reducing a proposed capital ratio to 8% from 15%. Bankers also are divided on the guarantee program (American Banker Aug. 20) ... * WASHINGTON (8/21/09)--James Lockhart, director of the Federal Housing Finance Agency (FHFA), will become vice chairman of Wilbur Ross & Co., a investment affiliate of Invesco Ltd. in Atlanta (Associated Press Aug. 20). Lockhart’s last day at the FHFA is today. He is expected to start at Wilbur Ross next month. Lockhart was appointed to his post at the FHFA three years ago by former President George W. Bush. The former president was Lockhart’s childhood friend and fraternity brother at Yale. Wilbur Ross and Lockhart met in the early 1990s when Lockhart ran the Pension Benefit Guaranty Corp. Ross was advising creditors in a steel company bankruptcy ...

NCUA issues reg alert on 21-day rule

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ALEXANDRIA, Va. (8/20/09)--The National Credit Union Administration (NCUA) has issued it’s Regulatory Alert 09-RA-07 to aid federally insured credit unions as they deal with the process of implementing the Federal Reserve’s interim final rule amending Regulation Z and provisions of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. According to the NCUA, the regulatory alert includes the Fed’s “suggested temporary remedy” of providing a disclosure stating that payments received within 21 days of the mailing of the notice will not be considered late. The Fed has said that this disclosure can be provided as a part of or alongside the usual periodic account statement. Additionally, the alert summarizes portions of the new rule and provides a link to the full text of the rule, as published in the Federal Register, and the full text of the CARD Act. The NCUA alert also encourages readers to “begin preparing for the remaining revisions and amendments” that will become effective in 2010. For the full NCUA Regulatory Alert, use the resource link.

21-day rule CUNA urges CUs document everything

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WASHINGTON (9/20/09)--Starting today, periodic statements sent to members on their open-end loans must be provided at least 21 days before the payment due date in order for a credit union to charge a late fee, report the account as delinquent to credit bureaus, or impose a penalty interest rate. "The application of this Truth-in-Lending Regulation Z provision to all open-end credit presents significant compliance challenges in making changes to credit union lending programs that have been in place for over a quarter of a century," says Kathy Thompson, Credit Union National Association (CUNA) senior vice president of compliance. "This 21-day requirement, imposed by the new Credit Card Accountability, Responsibility and Disclosure (CARD) Act, applies not only to credit cards, but to all loans credit unions make using open-end lending forms, including unsecured lines of credit, home equity lines of credit—HELOCs--signature loans, automobile loans, and more." When the Federal Reserve Board published its interim final regulations on July 22, it acknowledged that "it may be difficult for some creditors to update their systems to produce periodic statements by August 20, 2009 that disclose payment due dates...consistent with the 21-day requirement." Therefore, the Fed's interim rule allows credit unions "for a short period of time" to prominently disclose elsewhere on or with the periodic statement that the member's payment will not be considered late if received within 21 days after the statement is mailed or delivered. CUNA is sending the first of two comment letters to the Fed today and that letter, in part, urges the agency to be clearer and define its "short period of time" term. “A reasonable interpretation of the phrase ‘short period of time’ is the time necessary for credit unions to make needed changes to be in compliance,” CUNA tells the regulator. CUNA says this could vary for each credit union and could be three months, six months or somewhat longer depending on the credit union's situation. CUNA and leagues are also pursuing legislation to limit the 21 day rule to credit cards or obtain much more time for compliance. CUNA’s Thompson reiterates, "Credit unions are struggling to comply with this complex requirement under a very tight timetable." She adds, "Since there was no notice and comment period that typically occurs before issuance of a final regulation, the Fed apparently does not understand that there are operational considerations far beyond reconfiguring the monthly statement." Late payments can trigger automated late payment notices, transfers of funds from other accounts, and other actions, all based on the payment due date programmed into the credit union's system. There are also contractual problems, such as with biweekly payment arrangements, that have to be addressed for credit unions to be in compliance. Recognizing that many credit unions cannot possibly have programs in place immediately that conform to the new regulation, CUNA urges that credit unions document everything they are doing to make a good faith effort to build a program to comply with the 21-day requirement. "This will include discussions with data processors, forms suppliers, attorneys and others about what is required, what changes need to be made, and how long it will take to execute those changes," advises Thompson. "Tracking your compliance efforts will not only be useful in responding to any examiner inquiries, but also important if the credit union ever finds itself under attack in court for failing to comply with this provision within weeks of release of the interim regulation." Credit unions have asked what is acceptable language to add to their periodic statements if they are unable to reprogram their systems for periodic statements mailed this fall. The Fed did not provide model language. "Certainly, the language does not have to be lengthy, but it must be prominent," emphasizes Thompson. Depending on what a credit union's system may accommodate, CUNA suggests possibilities on the periodic statement itself include:
* Putting the notice near the top of the periodic statement; * Printing it in colored ink; * Putting it in capitals; or * Surrounding it by asterisks.
Further, according to CUNA, if a mailing includes a postmark, the special notice on the periodic statement could read: "We will not consider your payment late if it is received within 21 days of the date on the postmark, regardless of payment due date(s) printed on this statement." Or, with or without a postmark, the credit union could state: "We will not consider your payment late if it is received by SPECIFIC DATE, regardless of the payment due date(s) printed on this statement." The Fed requires credit unions to have reasonable procedures to determine when statements are actually to be mailed by or on behalf of the credit union -- then the credit union will add 21 days to that expected mailing date to fill in the blank. CUNA has assembled a number of frequently asked questions (see resource link below) including what a credit union might consider a "short period of time" for how long it may continue to use the special notice on or with its periodic statements. CUNA's resources also include information on the other provision in the Credit CARD Act that goes into effect today that only applies to credit cards. That provision requires change-in-term notices be provided at least 45 days in advance before increasing the annual percentage rate (APR) or changing significant terms in the credit card agreement, rather than the current 15-day notice period.

Inside Washington (08/19/2009)

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* WASHINGTON (8/20/09)--Swiss bank UBS agreed Wednesday to disclose the names and account details for more than 4,450 Americans suspected of tax evasion (The New York Times Aug. 19). Thousands of names are expected to be disclosed, bringing the total of UBS-related names released to the Internal Revenue Service (IRS) to 10,000. The Swiss government will work with other Swiss financial institutions to release the identities of Americans who have hidden money offshore. UBS plans to notify the clients whose names will be disclosed. Recently, some Americans have disclosed their secret accounts to the IRS to avoid penalties and prosecution. Federal prosecutors have suspected UBS, the world’s largest private bank, of selling tax evasion services to many wealthy Americans ... * WASHINGTON (8/20/09)--Financial observers are nearly certain that the Federal Deposit Insurance Corp. (FDIC) will charge banks a second special deposit insurance premium. The FDIC warned in May that a second assessment could be charged. Since then, 43 banks have failed, costing the insurance fund $8 billion. The FDIC has not said how much it would charge, but the fee likely would be based on the ratio of reserves to insured deposits. In May, the ratio was 0.27%--88 basis points below the minimum (American Banker Aug. 19). The FDIC is expected to give a second-quarter report on the banking industry Aug. 27 ... * WASHINGTON (8/20/09)--Twenty-four state attorneys general sent a letter to financial services lawmakers supporting the Obama administration’s proposed Consumer Financial Protection Agency. In the letter, the attorneys general urged the administration to retain a provision that would give the states increased power. Under the plan, states could enforce tougher rules than the consumer agency and also enforce state and federal consumer protection laws against national banks (American Banker Aug. 19) ... * WASHINGTON (8/20/09)--Commerce Secretary Gary Locke and Small Business Administration (SBA) Administrator Karen Mills will lead efforts to ensure that minority-owned and small businesses have increased access to federal government contracting opportunities. Under the plan, federal agency procurement officials will participate in more than 200 events during the next three months to share information on government contracting opportunities--including those under the American Recovery and Reinvestment Act. Beyond the 90 days, Commerce and the SBA will monitor and track the impact of their efforts for small businesses. “Small businesses employ half of the nation’s private sector work force; create a large share of the nation’s new jobs and introduce many groundbreaking ideas into the marketplace,” said President Barack Obama ...

Fryzel encourages defense CUs leadership

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ALEXANDRIA, Va. (8/20/09)--National Credit Union Administration Chairman (NCUA) Michael Fryzel recently noted the defense credit union community’s leadership in combating predatory lending outlets located in close proximity to military bases across the country. Addressing the annual meeting of the Defense Credit Union Council in San Francisco, Fryzel encouraged defense credit unions to continue their strong role. “Defense credit unions have done some of the most effective and impressive work to help keep consumers away from predatory practices, that are in evidence around our nation’s military bases. Your organization has worked with NCUA over the years in supporting changes to the law that help military personnel in this area, and we appreciate your continued support,” Fryzel told attendees. He added, ““I encourage you to continue to point the way for the rest of the credit union industry as we all work together to make sure that consumers continue to have real choices, and are able to get a fair deal in financial services.”

Inside Washington (08/18/2009)

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* WASHINGTON (8/19/09)--In a letter dated Aug. 7, Treasury Secretary Timothy Geithner defended the way he criticized bank regulators during a July 30 meeting. He wrote the letter to Republicans on the House Financial Services Committee (American Banker Aug. 18). Republican lawmakers have said Geithner tried to bully independent agencies, but Geithner said he wanted to express to regulators that they should not let agencies’ efforts to defend their turf impede reform. Regulators are independent and have a right to express their views, but regulators and the administration have shared goals and common ground, Geithner said ...

CUNA urges leniency on CARD Act exam issues

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WASHINGTON (8/19/09)—National Credit Union Administration (NCUA) Chairman Michael Fryzel should instruct agency examination staff to be flexible as credit unions struggle to comply with aspects of the new Credit Accountability Responsibility and Disclosure (CARD) Act, urged the Credit Union National Association (CUNA) Tuesday. In a letter to the NCUA chairman, CUNA President/CEO Dan Mica reiterated that a number of credit unions have found the 21-day rule, as it applies to open-end lending programs other than credit cards, presents “extremely challenging compliance concerns, particularly in light of the effective date later this week.” That rule prohibits creditors from claiming a payment as late unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. The provision goes into effect Thursday for all open end lending programs. Mica urged the NCUA that if a credit union is making good faith efforts to comply, the credit union should not be subject to any enforcement sanctions regarding a 21-day rule for open-end plans. The CUNA leader noted that CUNA has been aggressively seeking relief for credit unions at the Federal Reserve Board and in Congress. (See related story: Fed to CUNA: CUs have some leeway on 21-day rule.) “While it does not appear that the Fed will grant a more definitive extension of time for credit unions to comply, other than the ‘short period’ alternative it has already provided, that agency....(has) acknowledged the extreme compliance difficulties credit unions are experiencing,” Mica wrote. He added, “There is no question that the CARD Act is inflicting a significant toll on the credit union system. In recognition of this and the range of other issues credit unions are facing, including the sagging economy and funding for NCUA's corporate stabilization program, we urge you to direct NCUA examiners to work with credit unions as they reasonably determine what is their best approach for compliance.” Use the resource links below to access CUNA’s CARD Act FAQs resource as well as the complete Mica letter.

Fed to CUNA CUs have some leeway on 21-day rule

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WASHINGTON (8/19/09)--The Federal Reserve Board on Tuesday reiterated that credit unions will be allowed to be technically "inconsistent" with the 21-day requirement under the new Credit Accountability, Responsibility and Disclosure (CARD) Act for a "short period of time." In a Tuesday letter to Credit Union National Association (CUNA) President/CEO Dan Mica, the Fed said that during the undefined “short period of time,” credit unions may prominently disclose on or with their statements that the consumer's payment will not be treated as late if it is received within 21 days after the statement was provided. This approach allows credit unions flexibility in meeting their compliance responsibilities regarding the 21-day rule for open end plans other than credit cards for a reasonable period of time after August 20. It also allows them to treat a payment as late if the disclosure was provided but the payment was not received within the 21-day period. Section 106 of the CARD Act, as written, specifically prohibits creditors from claiming a payment is late unless the creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. The Fed said that while it understands the difficulties that the 21-day requirement creates for credit unions, “it would not be appropriate for the Board to deviate from the clear and unambiguous statutory requirements.” The Fed's letter indicates the agency feels it has no leeway to provide further relief for credit unions. Responding to the letter, Mica said that while the approach detailed by the Fed “provides more time for CUs to comply” and grants CUNA and associated credit union leagues more time to “work on achieving a legislative solution,” CUNA recognizes that “more permanent relief is needed” and is seeking such relief through ongoing discussions with legislators and the National Credit Union Administration. CUNA has been aggressively seeking relief for credit unions and discussing their compliance concerns with the requirement with both the Federal Reserve Board and Congress. In addition to pursuing legislation to limit the scope of the 21-day rule to credit cards -- which will be difficult to achieve and cannot be attained at least until after Congress returns in September -- CUNA has also written to NCUA board Chairman Fryzel to urge enforcement flexibility. (See related story: CUNA urges leniency on CARD Act exam issues)

Aug. 24 to be Matz swearing-in day

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ALEXANDRIA, Va. (8/19/09)--Deborah Matz will soon become the eighth chairman of the National Credit Union Administration (NCUA), after she is sworn in on August 24, the NCUA announced Tuesday. The swearing in ceremony will be completed by NCUA General Counsel Robert Fenner and will take place at 2 p.m. at the agency’s headquarters in Alexandria, Va.
If all goes according to plan, as of 2 p.m. (ET) next Monday, Deborah Matz will be sworn in as a member of the NCUA board, and is expected to be designated chairman shortly thereafter by President Obama. Matz is shown here taking an oath prior to her confirmation hearing. (CUNA Photo)
Once confirmed, Matz will serve a six-year term on the NCUA Board, ending in April of 2015. Matz, who will join the NCUA board for the second time, was unanimously confirmed by both the Senate Banking Committee and the full Senate following her nomination by President Barack Obama. Matz’s previous term on the board lasted from 2002 until 2005. Matz has given a taste of how she would govern during the recent confirmation hearings, indicating that she would look to revamp some aspects of the NCUA's rules governing corporate credit unions while also working to stabilize the corporate credit union system. Matz also pledged to work with credit union organizations, volunteers, and staff to ensure that the "vital" role that credit unions play in American life is "not only preserved, but enhanced" going forward.

NCUA commentary addresses CARD Act CUSO assistance

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ALEXANDRIA, Va. (8/18/09)--In a recent National Credit Union Administration (NCUA) legal opinion letter, the agency said that a so-called “courtesy period” that follows the payment due date for a credit account does not constitute a grace period under the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. NCUA Associate General Counsel Sheila Albin wrote that the CARD Act prevents creditors from treating credit account payments as late unless the creditor has “reasonable procedures” to ensure that account statements are delivered to the consumer “at least 21 days before the payment due date or the date on which the grace period expires.” The CARD Act and recent amendments to Regulation Z (Truth in Lending) also do not require federal credit unions “to disclose any period after the payment due date before which late fees are actually imposed,” Albin wrote. Albin also addressed nonmember loan servicing in a separate comment letter, telling an executive from Government of Guam Employees FCU that his credit union lacks the authority to provide loan servicing and collection services directly or through the assistance of a credit union service organization. However, Albin noted, the organization that this FCU wishes to assist, which in this case is the Guam chapter of Habitat for Humanity, could work with the credit union if it becomes a member of that credit union. The credit union could also donate the sought after lending program assistance as an “in-kind, charitable contribution or donation” if Habitat for Humanity does not qualify for membership in the credit union. To read either of the complete letters, use the resource links below.

Inside Washington (08/17/2009)

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* WASHINGTON (8/18/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel emphasized unity and commitment while speaking to the African American Credit Union Coalition’s 11th annual conference. “You have been through tough times. You have seen adversity. You have faced challenges financial and otherwise. And you have overcome these obstacles each time. I have a great deal of faith that you will continue to do so,” Fryzel said. He also noted the unique and important role that African American-oriented credit unions play in expanding credit union service to all eligible members. The coalition places a priority on increasing the global credit union movement’s strength by emphasizing the important role of credit union volunteers and professionals of African-American and African descent ... * WASHINGTON (8/18/09)--The Obama administration’s proposed Consumer Protection Agency is slated to focus equally on banks and nonbanks, but financial observers doubt that the agency will be able to do that. There are about 75,000 nonbank mortgage lenders and 8,000 banks. Michael Barr, Treasury assistant secretary of financial institutions, told American Banker (Aug. 17) that smaller banks could be given a break on supervision. Ellen Seidman, director of the Financial Services and Education Project at the New America Foundation, said the agency would likely be concerned with large institutions offering pay option adjustable-rate mortgages to millions of people rather than community banks providing basic 30-year mortgage loans. Nonbank lenders are concerned because regulators may not be familiar with their business models and therefore may not examine them the same way they examine banks. Smaller banks also are concerned about high examination fees, but Treasury officials have said larger banks would pay more in examination fees than smaller institutions ... * WASHINGTON (8/18/09)--Eric J. Spitler, top lobbyist at the Federal Deposit Insurance Corp. (FDIC), is leaving to work as the top lobbyist at the Securities and Exchange Commission (SEC) Tuesday. He was named director of the SEC’s office of legislative and intergovernmental affairs, and counselor to SEC Chairman Mary Schapiro (American Banker Aug. 17). Spitler worked for the FDIC for 18 years in positions including special assistant to the chairman, deputy director of the office of legislative affairs and legislative attorney ...

CDFI announces funding for Native American program

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WASHINGTON (8/18/09)--The U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund will make $12 million in Native American CDFI Assistance (NACA) Program awards available during the 2010 fiscal year. In comments accompanying a Monday release, CDFI Fund Director Donna Gambrell expressed her satisfaction with the record $12 million in NACA funding, adding that she has “seen firsthand” the accomplishments made by Native financial institutions that receive these funds. The CDFI awards financial assistance awards and technical assistance grants to Native American, Alaska Native, and Native Hawaiian communities through the NACA program, which was instituted in 2004. The CDFI Fund early last month awarded $8 million in financial aid and $3.6 million in technical assistance funds to Native CDFIs. A total of 33 credit unions applied for CDFI Funds during a supplemental application round held in late July, and the CDFI in September will award $52 million in annual appropriations to the highest rated applicants. A Senate bill that would set out $244 million for grants and assistance via the CDFI Fund is still awaiting action, and could be voted on when Congress returns in early September.

Credit CARD Act CUNA addresses CUs FAQs

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WASHINGTON (8/18/09)--The Credit Union National Association (CUNA) has prepared a document to assist state leagues and credit unions with credit unions' questions regarding their compliance obligations under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act provisions--especially on the 21-day periodic statements provision. CUNA has continued to receive compliance questions on the provision, which requires periodic statements to be provided 21 days before the payment due date for all open-end credit, effective Thursday. Although the trade association continues to aggressively pursue relief for credit unions on several fronts, the Federal Reserve Board has signaled that it will not provide relief to credit unions beyond the "short period of time" approach addressed in the rule's supplementary information, said Jeff Bloch, senior assistant general counsel, and Mike McLain, senior compliance counsel at CUNA.. That approach allows credit unions to comply with the rule even if periodic statements disclose payment due dates that are technically inconsistent with the rule. However, the CUNA attorneys said this relief is only available if a disclosure is provided on or with the periodic statement that the consumer's payment will not be treated as late for any purpose--if:
* It is received within 21 days after the statement was mailed or delivered; and * The credit union does not treat the payment as late for any purpose if received within that time period.
"Our primary focus for relief right now is Congress," Block and McLain said. "We will be working diligently throughout the recess and when Congress returns to achieve passage of an amendment to limit the scope of the 21-day rule to credit cards. Meanwhile, we continue to pursue other avenues of relief, including enforcement flexibility from the regulators." Questions frequently asked are addressed at the resource link.

Freddie Mac reports uptick in 30- 15-year mortgage rates

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WASHINGTON (8/17/09)--Freddie Mac late last week reported that the average 30-year mortgage rate rose to 5.29% and the average 15-year fixed-rate loan increased to 4.68% during the week ended Aug. 13. Both average mortgage rates represented increases from 5.22% for the30-year average and 4.63% for the15-year average reported during the previous week, Freddie Mac said. Treasury yields also rose during the week, according to Freddie Mac. The government-sponsored mortgage lender reported inconsistent movement related to adjustable rate mortage (ARM )rates, with five-year ARM averages increasing to 4.75% and one-year ARMs dropping to 4.72%. Freddie Mac chief economist Frank Nothaft cited "better-than-expected economic reports” as reason for the reduced mortgage rates. “High levels of housing affordability" have also recently buffeted homebuyer demand, he added. Nothaft also reported that “declines in some local housing markets” seem to be “nearing an end.” CU Members Mortgage and some of its credit union partners last month reported a sharp increase in the number of closed mortgage loans, with 4,580 closed loans for $756 million during the first five months of 2009. The number of closures over this five-month period rose by 83.2% when compared with the same period in the previous year.

Credit CARD Act a hot topic for CUs back home

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WASHINGTON (8/17/09)--Although legislative action has been halted by the congressional district work period, state credit union representatives have continued to respond to the Credit Accountability, Responsibility and Disclosure (CARD) Act through advocacy and organizational efforts.
Missouri Credit union officials discussed their concerns regarding the CARD Act with district representatives. From left to right, Randy Yeck, Stan Moeckli, Linda Allen, Brian Eyestone, Franz Kohler, Howard Hoemann, Rosie Holub, Lisa Farnen, Brian Bass and State Representative Al Liese. (Photo provided by the Missouri Credit Union Association)
The Missouri Credit Union Association’s (MCUA) newsletter The Missouri difference last week reported that Missouri credit union representatives discussed their concerns regarding the Aug. 20 deadline set forth by the recently passed CARD Act with a representative of Rep. Todd Akin (R-Mo.). Stan Moeckli, president of St. Louis-based Electro Savings CU, during the meeting said credit unions should ensure that their members and legislators “understand” that credit unions support “the original intent of the CARD Act, to protect consumers against less than ethical practices enacted by some credit card issuers.” However, Moeckli added, it is the unintended impact that some language in the CARD Act would have on some credit union loan products that credit unions are working to change. “Ultimately the act as currently written will hurt consumers that use open-ended loans by making it next to impossible for lenders to comply with the law,” he said. The group of credit union representatives also included MCUA President/CEO Rosie Holub and Vice President of Public/Legislative Affairs Amy McLard, American Eagle FCU’s Charlie Waalkes, Anheuser-Busch Employees’ CU’s Dave Osborn, Arsenal CU’s Linda Allen, Southpointe CU’s Brian Eyestone, and Vantage CU’s Randy Yeck. They also discussed open-end lines of credit, member business lending (MBL), interchange fees and the Community Reinvestment Act (CRA) during the in-district meeting. MCUA and related credit unions have planned additional meetings with members of Congress and their staffers in the coming weeks. The Association of Vermont Credit Unions has also sought to actively address the CARD Act. Its Newslines Express on Friday reported that over two-thirds of the association’s member credit unions took part in a midweek conference call on the new rules. The conference call, which included representatives from the CUNA Mutual Group, Vermont State Employees CU, and New England FCU, discussed some of the options for complying with the CARD Act, including the use of multi-featured open-end lending. The assembled representatives echoed many of the sentiments expressed by the Missouri leagues and, more generally, by credit union industry participants. According to the Newslines Express, they also agreed that existing loan due dates should be shifted to the end of the month and that any account late fees and reporting of delinquent accounts by credit bureaus should be temporarily suspended. The Credit Union National Association continues to address the 21-day rule through discussions with legislators and the Fed, and has urged policymakers to limit the scope of the 21-day rule to credit cards or, at a minimum, to grant more time for compliance with the 21-day provision for open-end plans other than credit cards.

Inside Washington (08/14/2009)

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* WASHINGTON (8/17/09)--The Federal Deposit Insurance Corp. (FDIC) is acting quickly to finalize rules governing private-equity ownership of banks while dealing with the expected failures of $25 billion asset Colonial Bank, $14 billion asset Guaranty Bank and $7 billion asset Corus Bank (American Banker Aug. 14). However, many private-equity investors have questioned the “restrictive” nature of FDIC proposals that could increase the FDIC’s resolution costs and limit the number of potential investors. Industry members have questioned the FDIC’s approach, saying it should complete its guidance before any transactions related to the three banks can take place. While some question the FDIC’s future willingness to negotiate separate deals with private-equity investors, others say the agency would have little choice but to cut separate deals with private-equity investors that wish to purchase portions of Colonial, Guaranty, or Corus. There is speculation that many have already bid on Guaranty … * WASHINGTON (8/17/09)--The Federal Home Loan banks (FHLBs) have taken issue with a report commissioned by the system's Office of Finance. The report indicates that the scattered nature of the FHLB system, which spans 12 districts nationwide, is harming the transparency and consistency of accounting within the system. While the report advocated “centralized management and control” of the FHLB system, FHLB Office on Finance CEO John Fisk said that the FHLBs could achieve the needed transparency and consistency “in a combined financial structure within the decentralized structure of the 12 home loan banks" (American Banker Aug. 14). Council of Federal Home Loan Banks President John von Seggern suggested that any decision related to centralization of the bank system should be made by the members ... * WASHINGTON (8/17/09)--As of July, Fannie Mae and Freddie Mac have refinanced almost 1.9 million loans through the Making Home Affordable Refinance Program (HARP), said the Federal Housing Finance Agency (FHFA). Under HARP, borrowers whose loan-to-value (LTV) ratio is 80% up to 105% are able to refinance without added mortgage insurance requirements. FHFA recently announced the expansion of HARP to allow borrowers with LTVs up to 125% to participate. Fannie Mae will begin accepting deliveries of refinanced loans with LTVs over 105% up to 125% as of Sept. 1. Freddie Mac will accept deliveries of these loans Oct. 1 ... * WASHINGTON (8/17/09)--Fannie Mae and Freddie Mac should engage in mortgage buyouts to avoid advancing unpaid interest to investors, which costs taxpayers, according to Ajay Rajadhyaksha, Barclays PLC analyst. About $600 billion of loans at the enterprises are 90 days or more delinquent, which equals $12 billion in interest if the rate is 6%, he said. However, the buyouts would erode the enterprises’ capital because they would write down the mortgages to discounted market prices (American Banker Aug. 13). The losses would force Fannie and Freddie to increase their use of a government backstop. But the buyouts could encourage Fannie and Freddie to modify their mortgages, said Chris Dickerson, deputy director for enterprise regulation at the Federal Housing Finance Agency. Arthur Frank, director of mortgage-backed securities research at Deutsche Bank Securities, said the savings on interest is small next to the amount lost in defaults ... * WASHINGTON (8/17/09)--Plans to overhaul the financial system are on track, according to Treasury Secretary Timothy Geithner. In an interview with The Wall Street Journal, he noted that the Obama administration also will not allow Wall Street to take on more risk than it can handle. The financial system is not reverting back to past practices. The administration “won’t let that happen,” Geithner said (The Wall Street Journal Aug. 14). Some large financial institutions, including Goldman Sachs, have recently recorded record profits. Achieving stability means that people can raise money, equity, and borrow more at lower rates, and it’s good that core parts of the nation’s financial system look profitable, Geithner said ... * WASHINGTON (8/17/09)--Joseph Murin, Ginnie Mae president, is set to step down this week to start a strategic advisory and consulting firm (Reuters Aug. 13). No successor has been named. The agency, the Government National Mortgage Association, guarantees investors payment of principal and interest on mortgage-backed securities that are backed by guaranteed or federally insured loans ...

Minn. CEO gives CU perspective on health care reform

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ROCHESTER, Minn. (8/17/09)--Kelly McDonough, president/CEO of First Alliance CU in Rochester, Minn., was chosen to participate in a roundtable discussion on health care reform Tuesday with U.S. Rep. Tim Walz (D-1). The group, picked by Walz, consisted of six Minnesota constituents who offered their perspectives on America’s health care system. Each constituent provided opinions on the strengths and weaknesses of the current health care system during the private meeting. McDonough noted that each year it is more difficult for her credit union to continue offering the same level of insurance to its staff because of rising health care costs. She explained that while providing quality medical coverage to employees is important to First Alliance, the cost of offering this benefit is “staggering.” “The meeting was an excellent opportunity to meet with Congressman Walz to discuss health care reform,” McDonough said. “It was encouraging to see that he is considering the impact this issue has on not only big businesses but also small, not-for-profit organizations like [First Alliance CU]. “As leaders in the community, [credit unions] need to be informed about legislative issues and the ramifications they will have on our businesses and communities,” McDonough added. “It is our responsibility to be engaged in the political process and to advocate for what we need [to serve members].” Also, McDonough has been a strong supporter of the Minnesota Credit Union Network’s (MnCUN) political initiatives, hosting numerous “meet and greet” events for Walz and visiting elected officials during legislative visits in St. Paul and Washington, D.C. “Through regular communications with elected officials, Minnesota credit unions aim to serve as reliable sources of information on issues that directly and indirectly affect the industry and its ability to serve members,” said Mark D. Cummins, MnCUN president/ CEO. “Kelly’s relationship with Congressman Walz demonstrates the impact credit unions can have on the legislative process by simply meeting and forming relationships with elected officials.”

Inside Washington (08/13/2009)

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* WASHINGTON (8/14/09)--Janet Yellen, president of the Federal Reserve Bank of San Francisco, is emerging as a candidate for the head of the Federal Reserve Board, according to financial observers. Yellen is an economist who headed the Council of Economic Advisors under Former President Bill Clinton. She also has taught economics at the University of California-Berkeley since 1980. If chosen, she would be the first woman to lead the Fed (American Banker Aug. 13). Besides Yellen, other candidates seeking to replace current Fed chief Ben Bernanke include Lawrence Summers, director of the National Economic Council and former president of Harvard University, and Alan Blinder, former Fed vice chairman. President Barack Obama has not indicated if he will nominate Bernanke again. Bernanke’s term expires in January ... * WASHINGTON (8/14/09)--The U.S. government spent more than it made in July for the 10th consecutive month (The Wall Street Journal Aug. 13). In a monthly budget statement released Wednesday, the Treasury said the government was $180 billion in debt during July. Last month’s federal government spending totaled $332 billion. The debt is attributed to costs of a rescue package for financial firms, reduced tax revenues from corporate profits, and the economic stimulus plan. The federal budget deficit was $102 billion in July 2008. Deficits of a consecutive 11 months have been recorded three times. The last time was May 1991. The widest deficit for one month is $193 billion, which was recorded in February ...

FASB to draft fair value accounting rule

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WASHINGTON (8/14/09)--The Financial Accounting Standards Board (FASB) should issue a sweeping exposure draft on fair value accounting around the end of this year, Chairman Robert Herz said at a FASB open meeting held Thursday. According to Herz, the exposure draft would address fair value accounting rules for all financial instruments, including allowances related to loan loss accounts. While Herz provided few details on the substance of the potential exposure draft, he indicated that the board would provide the industry with ample time to comment on the proposal once it has been issued. Herz said that the changes, once proposed and approved, could not be put into effect before 2011. However, the board will provide a clearer schedule for the implementation of the proposed rules by posting a project plan timeline on the FASB website sometime next week. FASB will hold a closed meeting of its trustees on Aug. 25. The Credit Union National Association will discuss fair value and other matters of concern to credit unions during a Sept. 17 conference call with Chairman Herz.

GAO No CUs referred to DOJ for fair lending violations

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WASHINGTON (8/14/09)--No lenders regulated by the National Credit Union Administration (NCUA) have been referred to the U.S. Department of Justice (DOJ) for "being at potentially heightened risk" of violating fair lending regulations, the Government Accountability Office (GAO) has found. Lenders that are regulated by the Office of the Comptroller of the Currency (OCC) were also less likely to be referred, while the GAO reported that those that fall under the supervision of the Federal Reserve, the Office of Thrift Supervision (OTS), and the Federal Deposit Insurance Corporation (FDIC) are more likely to be referred to the DOJ. According to the report, the NCUA has made zero lender referrals since 2005. However, the OCC has made one referral, and the Fed, the OTS, and the FDIC have referred over 100 lenders. Overall, the GAO report, which was released by House Financial Services Committee Chairman Barney Frank (D-Mass.) on Thursday, called on federal agencies to increase the amount of data that is collected from lenders to facilitate compliance with fair lending laws. According to the GAO, the data should include “key underwriting data for mortgage loans” like credit scores; loan-to-value and debt-to-income ratios; information on an applicant's race, ethnicity and gender; and “relevant underwriting data for non-mortgage loans.” While the GAO admitted that altering reporting requirements could increase costs for some lenders, it recommended that legislators find ways to offset those costs. One potential option would be limiting the new requirements to larger institutions that handle larger percentages of loans, the GAO said.

TIL changes CUs mortgage process company says

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WASHINGTON (8/14/09)--CU Members Mortgage has warned that recent changes to Truth in Lending disclosures that would modify disclosures for closed-end mortgage loans and home equity lines of credit (HELOCs) will “greatly affect the mortgage loan process.” These changes may “reflect negatively” on organizations that are not trained nor fully prepared for the new regulatory changes, according to the Dallas-based mortgage company. The Federal Reserve recently proposed changes to Regulation Z (Truth in Lending), including a revision that would add some fees and settlement costs to annual percentage rate calculations. Regulation Z would also require lenders to provide a list of suggested questions for borrowers to ask about a mortgage. Lenders would show borrowers how the interest rate of their loan compares with those given to other borrowers with excellent credit and would provide borrowers with information on how their payment schedule could change if they are signed on to an adjustable rate mortgage. Lenders also would need to notify borrowers of a change in their monthly payment at least 60 days in advance and would be required to provide a “final disclosure,” dictating many terms of the mortgage, within three days of closing. The Fed is currently accepting comments on this proposal, and will continue to do so until late October. The Credit Union National Association is analyzing these proposals and will post a regulatory comment call on the proposals soon. For prior coverage of the proposal, use the resource link.

Eight former CU employees under prohibition orders

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ALEXANDRIA, Va. (8/13/09)--The National Credit Union Administration (NCUA) has issued orders prohibiting eight individuals from participating in the business of any federally insured financial institution. In one order, former First Delta FCU employee Nikita Brown was sentenced to 78 months in prison, five years of probation, and $1.46 million in restitution after she was convicted of bank fraud and embezzlement. Jacqueline Tribou and Robyn Mullen-Turner, who formerly served at Eastern Maine Medical Center FCU and GPM CU, respectively, will serve comparatively light sentences for theft. Former Prince Kuhio FCU manager Roselle Farias, who was also convicted of bank fraud, will serve a 16-month term and will pay over $96,000 in restitution. Another former manager, Gisela Rivera Rosado of Newark, N.J.-based La Casa FCU, will serve a six-month house arrest term, five years of probation, and will pay $120,000 in restitution for embezzlement. Jorge Fleitas, formerly of Louisville, Ky.'s Beacon Community CU, will serve two years in prison, three years of probation, and will pay over $19,000 in restitution. He was convicted of conspiracy to commit mail and bank fraud, as well as aggravated identity theft. Eve Hutchinson, formerly of New York’s Buffalo Fire Department FCU, will also serve a light sentence following her conviction on grand larceny charges, but will pay $72,000 in restitution. Former New Alliance FCU teller Susan Bender signed an injunction without admitting or denying fault. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Dodd urges Fed to extend CARD Act deadline for CUs

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WASHINGTON (8/13/09)--Working closely with the Connecticut Credit Union League, Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday urged the Federal Reserve Board to provide relief to credit unions regarding the 21-day rule under the Credit Accountability, Responsibility and Disclosure (CARD) Act as it applies to open-end plans other than credit cards. In a letter to Federal Reserve Board Chairman Ben Bernanke, Sen. Dodd urged the Fed to allow credit unions “more time to come into compliance” for such open-end plans. Under the Act, creditors are required to provide periodic statements to all open-end plan borrowers 21-days before their payment due dates, effective Aug. 20. Credit unions have indicated they can comply with these provisions for credit cards, but many credit unions have indicated that meeting the requirements for all other open-end plans is horrendous, and may not be possible for some credit unions by the rapidly approaching Aug. 20 effective date. Sen. Dodd urged the Fed to extend the current compliance deadline for credit union open-end plans other than credit cards, stating that the existing compliance date has caused “legitimate implementation difficulties” for a credit union product that “was not the primary focus” of the CARD Act. Dodd said that while the main goal of the 21-day provision of the CARD Act is to “ensure” that financial firms provide consumers the necessary window to respond to their billing statements, the rule is causing particular problems for credit unions that offer multi-featured credit plans with sub-accounts. The effort was supported by the Credit Union National Association (CUNA). CUNA said it will continue to pursue relief for credit unions on the issue by urging policymakers to limit the scope of the 21-day rule to credit cards. Barring that, it is seeking more time for compliance with the 21-day provision for open-end plans other than credit cards. Also, CUNA has met and discussed this issue repeatedly with the Fed. Earlier this week, the Consumer Federation of America, working with CUNA, expressed its concerns over this portion of the CARD Act in letters to the Fed and to Dodd. Late last month CUNA President/CEO Dan Mica encouraged credit unions to communicate directly with the Fed regarding this matter. CUNA issued a memo to help member credit unions deal with compliance issues created by the 21-day rule.

Inside Washington (08/12/2009)

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* WASHINGTON (8/13/09)--The Federal Reserve Bank of Cleveland Tuesday released a study exploring the idea of separating systemic risk into three tiers. The first tier would include high-risk institutions--those whose failure would pose the biggest risk to the financial system. The institutions would include large interstate banks and multi-state insurance companies. They would be required to have strict reporting guidelines, stress tests, and additional capital to absorb losses. Tier two would include moderately complex financial institutions, such as large regional banks and insurance companies. The institutions would have periodic stress tests, additional reporting requirements and more rigorous supervision than they have today. Tier three would include non-complex institutions--those that fall outside of the systemic institution watchdogs’ purview because of their low probability that a failure or stress would cause problems in the financial system. The goal of the three-tiered system is to match the level of oversight and regulation needed for different kinds of institutions, the report said. The report was authored by James Thomson, a vice president in the Cleveland Fed’s Office of Policy Analysis ... * WASHINGTON (8/13/09)--The Treasury has sent a final piece of legislative language to Capitol Hill regarding over-the-counter (OTC) derivatives. The legislation will provide for the regulation and transparency of all OTC derivative transactions; have strong prudential and business conduct regulation of all OTC derivative dealers and other major participants in the derivative markets; and improve regulatory and enforcement tools to prevent manipulation, fraud and other abuse, the Treasury said. The language comes as the use of credit default swaps (CDS) and other OTC derivatives increases. The OTC and CDS markets have been largely unregulated. The risk can contribute to the collapse of major financial firms and trigger stress throughout the financial system, Treasury added ...

Compliance Challenge CARD Act 21-day provision

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WASHINGTON (8/13/09)--In this month’s Compliance Challenge, the Credit Union National Association (CUNA) addresses how credit unions can best comply with portions of the recently enacted CARD Act that require 21 days of advance notice for payments to all open-ended credit accounts. CUNA cannot suggest any single method of dealing with the 21-day requirement, but its recently-published memo does provide several options taken by some credit unions. Those options include changing due dates to establish a uniform payment due date, printing the current and following month's payment due dates on the account user's periodic statement, and retaining the existing due dates, but providing additional periodic statements. However, as CUNA has said in the memo, “every compliance option available to credit unions involves substantial costs and/or disruptions to business practices.” While changing due dates to establish a uniform payment due date would mirror how legislators and the Fed envisioned compliance would work for credit card accounts, such a change would require systemic changes for many credit unions and could particularly challenge larger credit unions that send out periodic statements in cycles throughout a given month. Printing current and future payment due dates on an account user's periodic statement would likely be the cheapest and easiest way to meet compliance requirements, but credit union members may need substantial education about these changes to avoid confusion. In addition, the Fed's staff believes this method may be contrary to the intent of the law and may in the future indicate in a more formal manner that this option is not compliant with the rule. Preserving existing due dates while adding additional periodic statements is another option, but could substantially increase a credit unions mailing and processing expenses. The Fed also has allowed some leeway for credit unions that cannot meet the required compliance deadline of Aug. 20 by providing a “transitional compliance option of including an insert or language” within periodic account statements. To see the full compliance challenge, use the resource link.

CUNA issues comment call on BSA amendments

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WASHINGTON (8/13/09)—The Credit Union National Association (CUNA) has issued a regulatory comment call on the Financial Crimes Enforcement Network’s (FinCEN) proposed amendments to the Bank Secrecy Act’s (BSA) money services business (MSB) provisions. The revisions clarify which entities are covered by the BSA regulations and update the MSB regulations and definitions to reflect past guidance and rulings, current business operations, evolving technologies, and emerging business lines. The revisions would also apply the rules of the BSA to some foreign-based MSBs with ties to the U.S. The proposed rule also seeks comment from the industry on stored value products. While the proposed rule does not make any substantive changes at this time, FinCEN is seeking comment from the industry on stored value products to assist with a future rulemaking. Comments are due to CUNA by Aug. 26. Comments solicited by FinCEN should be submitted by Sept. 9. To view the CUNA comment call, use the link.

NCUA closes Nevadas Community One FCU

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ALEXANDRIA, Va. (8/13/09)--The National Credit Union Administration on Tuesday announced that it has closed Las Vegas-based Community One FCU, citing the credit union’s “declining financial condition” as the reason for the closure. The $159 million assets Community One FCU is the fifth federal credit union to be liquidated this year. The 21,000 members of Community One FCU will now be served by Utah-based America First FCU, which currently holds $4.9 billion in assets and more than 495,000 members. America First currently has 88 branch locations. It is not known if America First will assume control of any of Community One’s existing branch locations.

CLF NCUA consider shifting USC stock ownership

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ALEXANDRIA, Va. (8/12/09)--The National Credit Union Administration (NCUA) board and the Central Liquidity Facility (CLF) board will consider shifting stock ownership from U.S. Central to other individual natural person credit unions or "agent groups" of credit unions via sales of shares, said CLF President Owen Cole in an NCUA webcast Monday. This transfer is one of many options that the boards could consider in the coming months, and Cole said that they could present a proposal for public comment “for the industry to consider.” The NCUA recently announced the transfer of accounts holding $1.8 billion of CLF funds from U.S. Central FCU to the U.S. Treasury and said that it is exploring "alternatives" regarding the transfer of primary ownership of CLF stock to other credit unions or groups of credit unions "through the anticipated reforms to the corporate network." During the webcast, Cole said that the transfer from U.S. Central was related to accounting issues. The NCUA in a recent release said that the change resulted from the CLF's consultations with its auditor, and sources have indicated that the Treasury favored this change. According to the NCUA release, the CLF fund transfer was due to an auditor determination that U.S. Central’s role as both an investor in the CLF and as the agent holding the CLF's funds, including the cash resulting from its own investments in CLF stock, could have resulted in some assets being double counted. Cole said that the CLF has proven to effectively maintain liquidity throughout the credit union system. Cole also touted the benefits of investing in the CLF through direct means or through agents, adding that natural-person credit unions should continue to support the CLF’s ability to provide liquidity by including the CLF as part of their total investment plan.

Inside Washington (08/11/2009)

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* WASHINGTON (8/12/09)--Sen. Christopher Dodd (D-Conn.), chair of the Senate Banking Committee, declared a victory after American Express Co. and Discover Financial Services said they would eliminate overlimit fees, or fees charged to cardholders who exceed their credit limits (American Banker Aug. 11). Dodd continues to support the creation of a consumer protection agency, which has been proposed by the Obama administration. Dodd also has said the Fed should require consumers to opt in for overdraft protection to keep them from being charged fees ... * WASHINGTON (8/12/09)--The Financial Accounting Standards Board (FASB) is considering using mark-to-market accounting as the default method for valuing financial instruments. Financial observers say the rule, if approved, would provide investors with a better perspective on companies’ financial health while simplifying accounting rules (American Banker Aug. 11). The proposal would also help define when companies should use mark-to-market accounting to value their assets. Many banking groups oppose the FASB proposal, saying that companies should not have to absorb the dropping values of loans they have no intention of selling. In April, FASB adopted rule changes on mark-to-market accounting and on treatment of other-than-temporary-impairment of assets. The Credit Union National Association said the action was a positive development and would help credit unions and financial institutions with some market issues. However, it noted that FASB could have done more (News Now April 3) ... * WASHINGTON (8/12/09)--Esther H. Vassar has been appointed national ombudsman and assistant administrator for Regulatory Enforcement Fairness for the Small Business Administration (SBA) by SBA Administrator Karen Mills. Vassar previously served as a commissioner and chair of Virginia’s Alcohol Beverage Control Board. In her role at the SBA, she will help small businesses that experience excessive or unfair federal regulatory enforcement actions, such as repetitive audits or excessive fines and other actions ... * WASHINGTON (8/12/09)--Yolanda Garcia Olivarez was appointed regional administrator for the Small Business Administration (SBA) for Region VI, which is headquartered in Dallas. The region includes Texas, Arkansas, Louisiana, New Mexico and Oklahoma. Olivarez has worked in trade, commerce and financial services industries for 35 years. Since 1995, she has been a senior vice president/commercial lender and business development officer at Wells Fargo ...

Hyland interview continues call for diversity in CUs

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ALEXANDRIA, Va. (8/12/09)--National Credit Union Administration (NCUA) board member Gigi Hyland renewed her call for stronger diversity within the credit union movement, telling attendees at a credit union conference that “diversity and collaboration are the cornerstones for credit unions’ future sustainability and success.” Hyland’s comments, which were delivered before the African-American Credit Union Coalition’s annual conference, echoed statements made during a recent interview with News Now staff. During the interview, Hyland said that credit union directors should work to ensure that their leadership at both the staff and the board level “truly reflects” the diversity of their field of membership. Reflecting the true scope of their membership is of particular importance to community credit unions, which have a slightly different business model and different goals from the majority of credit unions. While the NCUA board must continue to talk about diversity in credit unions, Hyland said that the board must also lead by example by being aware of its own internal practices. Both the NCUA and individual credit unions should also work “in their own individual way” to foster interest in credit unions among younger potential members to ensure the future sustainability of the credit union business model. Continuing the credit union system’s emphasis on financial education is key not just to empowering people and helping them understand and manage their money, but also to helping them to recognize “the credit union difference,” Hyland added. Hyland told News Now that while she looks forward to welcoming incoming NCUA Chairman Deborah Matz back to the board, she is unsure whether the seating of a new, Democratic chair will mark a significant shift in the tone of NCUA actions. While it’s a “very partisan process” to get on the board, Hyland said that the partisanship on the board “is not as strong as some people might think it would be” once the board members begin their work. Each board member's “charge” is to “protect the safety and soundness” of credit unions and the insurance fund while also working to protect consumers, and partisanship does not come into play in the deliberation of issues related to that stated mission, Hyland said. Generally, Hyland said that she could not anticipate what types of changes would be advocated by Matz. More specifically, Hyland said that she did not know what form the NCUA’s pending rule changes for corporates would take. However, public comment will be crucial to how the NCUA moves forward to address any changes to corporate governance. While unsure whether the NCUA would take on the issue itself, she advocates that credit unions offering alternatives to short-term payday loans should “offer those products in a manner that is consistent with the credit union mission and not chase fees for the sake of chasing fees.”

CFA asks Fed to extend CUs open-end credit deadline

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WASHINGTON (8/12/09)—The Consumer Federation of America (CFA) Tuesday has sent letters asking that credit unions be granted more time to comply with the 21-day Credit CARD Act notice requirement for open-end plans other than credit cards. The CFA sent the letters at the urging of the Credit Union National Association (CUNA) after multiple discussions with CFA. CFA noted that a Federal Reserve Board rule intended to implement a section of the Credit Card Accountability, Responsibility and Disclosure Act--or Credit CARD Act--would affect a unique product "offered by credit unions." That section of the Fed rule requires that a creditor may not treat a payment on any open-end plan as late unless the creditor has adopted reasonable procedures to ensure that periodic statements have been mailed at least 21 days prior to the due date. In similar letters to the Fed and to Senate Banking Committee Chairman Christopher Dodd (D-Conn.), the CFA said the primary focus of the 21-day notice requirement is credit card issuers and added regarding the application of the 21-day rule to credit cards, that it is “a very important provision that will help consumers who responsibly pay their bills avoid unjust late payment fees.” However, the CFA noted to the regulator and the lawmaker that the provision will also affect other forms of open-end credit, “including multi-featured credit plans with sub-accounts that credit unions have been permitted to offer for decades. “We believe that the credit unions have identified legitimate implementation difficulties for a complicated and useful product that was not the primary focus of this requirement,’ the letter said. It added: “CFA has worked with credit unions closely over the years, and we know that they will make every effort to comply with this provision as quickly as possible.” The Credit Union National Association (CUNA) has warned that applying a brief compliance timeframe to a complicated and entailed compliance process could present insurmountable problems for credit unions, and CUNA President/CEO Dan Mica late last month encouraged credit unions to communicate their concerns regarding the issues surrounding the CARD Act with the Fed. While CUNA is working with the Fed to delay the current compliance date of Aug. 20, it has also created a compendium of information to help credit unions tackle many of the compliance challenges that lay ahead. To see the CUNA compliance guide, use the link.

NCUA extends temporary corporate guarantee date

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ALEXANDRIA, Va. (8/12/09)--The National Credit Union Administration (NCUA) in its most recent update on the status of the corporate credit union system said that it has extended the expiration date of its Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) until Dec. 31, 2011. The TCCUSGP, which backs up the National Credit Union Share Insurance Fund's (NCUSIF) coverage of all shares--excluding paid-in-capital and membership capital accounts--at corporate credit unions, was scheduled to expire on Sept. 31, 2011. The extension will cover new deposits with maturities of two years or less in participating corporate credit unions made before Dec. 31. In other corporate credit union news, the NCUA said that U.S. Central FCU has “established $8.8 billion in contingent borrowing capability” with the help of the TCCULGP. U.S. Central is also maintaining $7.8 billion in liquidity, and recorded $537 million in other-than-temporary-impairment (OTTI) charges for the second quarter of 2009, reducing its remaining member capital shares to 37% of the original balance. Fellow corporate credit union WesCorp recorded $541.1 million in OTTI charges during the second quarter, and the impact that the Temporary Corporate Credit Union Stabilization Fund is having on the OTTI charges for both corporate credit unions is still being evaluated. For the full NCUA release on the corporates, use the resource link.

Top Association CEOs list includes CUNAs Mica

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WASHINGTON (8/11/09)--Credit Union National Association (CUNA) President/CEO Dan Mica has been named as one of 40 top association CEOs in CEO Update’s first-ever list of influential executives. CEO Update, a Washington bi-weekly publication that reports on association and non-profit executive careers and people, compiled its list from associations that serve all sectors of the economy, including the American Medical Association and the U.S. Chamber of Commerce. The publication notes that Mica, a former five-term congressman, has spent the “last 13 years promoting the interests” of credit unions, and “protecting them from the banks that, he says, are out to destroy them.” According to CEO Update, individuals were chosen to appear on the list by fellow CEOs, as well as executive recruiters. Among the criteria to consider in nominating a CEO: legislative success, leadership ability, skill in raising a group’s profile or managing a crisis; history of building coalitions and reaching consensus. Also named to the list from the financial services industry was Camden Fine, CEO of the Independent Community Bankers of America. Among the other 40 CEOs on the list are Tom Donohue of the U.S. Chamber of Commerce, John Engler of the National Association of Manufacturers, Glenn English of the National Rural Electric Cooperative Association, and Dave McCurdy of the Alliance of Automobile Manufacturers.

Inside Washington (08/10/2009)

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* WASHINGTON (8/11/09)--The Federal Reserve Board on Monday announced that it has adjusted the fee-based trigger for additional disclosures under the Truth in Lending Act to $579, effective Jan. 1, 2010. The Fed’s yearly fee adjustment would affect home mortgage loans that bear rates or fees above a certain amount. However, the Fed said that the adjustment does not affect the new rules for “higher-priced mortgage loans” that the board adopted in July 2008. The rules are determined by the use of a different rate-based trigger ... * WASHINGTON (8/11/09)--Several analysts have weighed in on last month’s proposal by Federal Reserve Board Vice Chairman Donald Kohn and Fed Gov. Elizabeth Duke to make consumer protection a core mission of the Fed instead of creating a separate agency. The Obama administration has proposed a separate agency. Some financial observers perceived their comments as a proposal to expand the Fed’s mandate to maximize employment and promote price stability to include consumer protection (American Banker Aug. 10). Placing consumer protection with the other mandates could be troublesome because price stability and employment are more important than consumer protection, said George Kaufman, Loyola University professor. Robert Litan, Brookings Institution fellow, said placing consumer protection as a core function of the Fed gives the central bank the impression that it’s okay to spend more money on the mandates. Kevin Jacques, finance department chair at Baldwin-Wallace College, said the Fed’s consumer protection proposal is just talk. The Fed’s job is to oversee the safety and soundness of the financial system, and consumer protection is “further down the line,” he said ...

Reg reform rollout to continue after summer break

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WASHINGTON (8/11/09)--Although debate on the Hill over regulatory reform has paused due to the ongoing district work period, reform will remain high on the congressional agenda once Washington returns to its normal schedule early next month. Rep. Barney Frank (D-Mass.) expressed confidence that the House would pass on a regulatory reform bill to the Senate by October, with President Barack Obama signing the completed legislation by the end of the year. Frank added that there was no conflict with other pending health care and environmental legislation. Frank has publicly expressed the need for a new regulatory regime that would hold regulators accountable to their responsibilities as overseers, limit some securitizations by requiring some risk retention and protect consumers. Consumer protection has been a frequent topic of debate, and several sources have indicated that the House could hold markup sessions as well as a vote on the proposed Consumer Financial Protection Agency (CFPA) in September. While many in the financial services industry have publicly opposed the CFPA, which would seek to protect consumers through various rulemaking, oversight, and enforcement tools, the Credit Union National Association (CUNA) has said it is willing to work with legislators to ensure that the needs of credit unions are met by the legislation. CUNA has also met with Treasury Secretary Timothy Geithner in recent months, and Geithner showed an "intense interest" in the credit union-specific issues of member business lending and alternative capital. He indicated that he looks forward to working with credit unions to address some of the perceived deficiencies in the financial regulatory structure. Possible changes to financial regulation could also include limits on executive compensation, and this issue was addressed by legislation that passed the House on July 31. H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009, would seek to ensure that compensation structures do not encourage excessive risk-taking, and CUNA and the National Association of Federal Credit Unions have told House Speaker Nancy Pelosi (D-Calif.), that credit unions should be excluded from this legislation because they are not responsible for the financial issues the bill would address. While regulatory reform looks to be the most pressing issue, member business lending restrictions, interchange fees, and a number of other items that are of interest to credit unions could be addressed by the Congress soon.

Inside Washington (08/07/2009)

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* WASHINGTON (8/10/09)--Rep. Carolyn Maloney (D-N.Y.) announced that she will not enter a primary race against Sen. Kirsten E. Gillibrand (D-N.Y.). Maloney is chairman of the Joint Economic Committee, a member of the House Financial Services Committee and chair of its subcommittee on financial institutions, and an author of credit card reforms. Gillibrand was picked by New York Gov. David Paterson to fill Secretary of State Hillary Clinton’s vacant Senate seat in January. Maloney said she decided not to run because she wants to address challenges involving health care reform, the economy and clean energy issues (Associated Press Aug. 7) ... * WASHINGTON (8/10/09)--Federal Housing Finance Agency (FHFA) Director James Lockhart is advocating for separating Fannie Mae and Freddie Mac into good banks and bad banks--a plan that many industry representatives doubt would have much political support. Lockhart, who confirmed Thursday that he would resign this month, said the solution could help Fannie and Freddie get rid of their most troubled holdings and return to the market. The government would continue to keep the troubled holdings and provide support for debt and mortgage-backed securities (American Banker Aug. 7). Lawrence White, economics professor at New York University, said Mellon Bank 20 years ago separated good banks from bad banks by isolating bad assets and assigning managers to work out their problems. However, observers say Fannie and Freddie’s situation is different because, unlike Mellon, they don’t have enough capital to finance a bad bank ...

Am. Banker Interchange fees are simply business for some retailers

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WASHINGTON (8/10/09)--Breaking the line that has been drawn by many retail industry representatives in Washington, a group of retailers have elected to eschew cash transactions by moving to accept only credit and debit cards for purchases. As reported in American Banker, some retailers, including restaurants and, in some cases, airliners, have elected to accept interchange fees as a cost of doing business. One New York-based restaurateur cited the security of cashless transactions as a reason for the switch to plastic purchases. The ease of using only one system for all purchases is another reason for the switch, he said. Retail representatives, as well as nationwide corner store chain 7-11, have spoken out against interchange fees, with 7-11 mounting a petition campaign that is seeking to net one million customer signatures. Merchants have claimed that the “hidden” interchange fee system deprives customers of potential savings, and they are pressing for greater transparency regarding interchange fees. Legislative actions aimed at addressing the interchange issue, H.R. 2695, the "Credit Card Fair Fee Act of 2009," and S. 1212, the “Credit Card Fair Fee Act,” have been introduced recently but have not been discussed by the full House of Senate. H.R. 2695, as introduced by Reps. John Conyers Jr. (D-Mich.) and Bill Shuster (R-Pa.), would allow merchants to negotiate fees with financial institutions via an antitrust exemption. Sen. Richard Durbin’s (D-Ill.) S. 1212 would establish a three-judge panel to mediate fee disputes between financial service providers and retailers. The Credit Union National Association (CUNA) opposes these pieces of legislation, and has asked Congress to, at a minimum, wait for the results of a Government Accountability Office review of interchange fees before taking any action on interchange fees. CUNA and other members of the Electronic Payment Coalition have spoken in favor of the current interchange fee structure, saying that regulating interchange fees would adversely affect consumers, competition, and technological innovation. CUNA has also highlighted the positive aspects of interchange fees, saying that the fees help credit unions cover their expenses and losses while offering merchants a guaranteed source of payment at the time that the transaction is completed.

Confirmed Matz promises focused positive agenda

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WASHINGTON (8/10/09)—In her first comments since she was confirmed to return to the National Credit Union Administration board, incoming NCUA Chairman Deborah Matz promised a “focused and positive agenda” that will be “characterized by an ongoing priority on reform and revitalization.”
Click to view larger imageDeborah Matz, who was unanimously confirmed to join the NCUA on Friday, has promised "reform" and "revitalization" during her tenure as NCUA Chairman. She is shown here at her nomination hearing. (CUNA Photo)
Matz was unanimously confirmed by the full Senate on Friday, and will soon join the NCUA board for the second time. Matz's nomination was scheduled for Senate approval several times in recent days, but a busy Senate calendar, dominated by such things as okaying $2 billion to extend the "cash for clunkers" program, and approving Sonia Sotomayor as a Supreme Court Justice, pushed back the Matz vote. Matz last served on the board between 2002 and 2005, and most recently held the position of executive vice president and chief operating officer of Maryland-based, $800 million-in-assets Andrews FCU, an experience which Matz said "sensitized" her "to the need for effective, rather than excessive, regulation." Current NCUA Chairman Michael E. Fryzel congratulated Matz on her confirmation, adding that he is certain that Matz will meet the “current economic turmoil and challenges,” challenges that require “strong, practical, progressive leadership,” with confidence. Credit Union National Association (CUNA) President/CEO Dan Mica joined Fryzel in congratulating Matz on her confirmation, saying that CUNA looks forward to working with Matz to ensure the "continued safety and soundness of credit unions" and to foster "a regulatory environment in which credit unions may continue to grow, prosper and effectively serve their members." Matz has taken on so-called “progressive” stances in the past, as she in 2002 provided the lone vote against what she has called "overly broad and permissive" NCUA corporate credit union regulations. Matz during recent Senate committee testimony also promised to revamp some aspects of the NCUA's rules governing corporate credit unions, and, more generally, stated that further work is needed to stabilize the corporate credit union system. Matz in her statement also pledged to work with the NCUA, credit union volunteers, and credit union staff to ensure that the “vital” role that credit unions play in American life is “not only preserved, but enhanced” going forward.

FFIEC releases loss mitigation guidance

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WASHINGTON (8/7/09)--The Federal Financial Institutions Examination Council (FFIEC) on Thursday said that mortgage loan servicers “have an obligation to act in the best interests” of their clients and should not consider “the potential impact” of a loan modification on a first or subordinate lien mortgage. The FFIEC, which includes the National Credit Union Administration as well as other federal regulators, said that mortgage loan servicers should modify first lien mortgages or subordinate liens “when doing so would produce a greater anticipated recovery” to the lienholders “than not modifying the loan.” Failing to follow these standards “may be a breach of the servicer’s obligation” to their clients, the FFIEC statement warned. The joint agency release noted that it was a reiteration of guidance given in the past. Perhaps coincidentally, there has been a spate of negative attention to loan modification efforts by some of the nation’s mortgage lenders who critics charge could be doing more to help troubled mortgage holders avoid foreclosures on their homes.

Fryzel to Fed Consider CU CARD Act compliance challenges

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ALEXANDRIA, Va. (8/7/09)—Underscoring the Federal Reserve Board’s own words about a “short” reprieve from an August 20 compliance date for the 21-day Credit CARD Act notice requirement, Michael Fryzel this week reiterated credit union concerns regarding the tight compliance timeframe they face. Fryzel, chairman of the National Credit Union Administration (NCUA), wrote to Fed Chairman Ben Bernanke asking the Fed leader to “give every consideration to the significant costs and operational difficulty many credit unions will experience as they work to come into compliance” with the Fed’s recent interim final rule. At issue is a section of the interim rule that prohibits creditors from claiming a payments is late unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date. Fryzel expressed confidence with credit union preparations for the rule, but said gearing up for the new disclosures “is expected to be costly, and full compliance may take some months.” “I am sure you appreciate that, as a result of this rule, creditors are now vying with one another to tap the available vendors and resources to make these changes to meet the requirements of the interim final rule. “As a result, the credit union industry, for which any additional regulatory costs are particularly burdensome, may experience difficulty in achieving full compliance, particularly in these uncertain economic times,” Fryzel noted to the Fed chairman. In its interim rule, the Fed indicated that "for a short period of time after August 20," periodic statements for open-end credit other than credit cards may disclose due dates that are inconsistent with the 21-day requirement under certain circumstances. However, the Fed to date has declined to be any more precise about how long a short period of time may extend. The Credit Union National Association (CUNA) has been seeking to address the compliance problem through both statutory and regulatory avenues. CUNA has requested that Congress address the problem by stating that the provision was never intended to go beyond application to credit cards. Without that fix, CUNA has also been working with regulators to seek a later compliance deadline. However, CUNA, noting the realities that credit unions face with the pressing deadline, also this week issued copious guidance to support credit union compliance with the new rules. (See related story: CUNA doc helps CUs cope with CARD Act regs)

Inside Washington (08/06/2009)

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* WASHINGTON (8/7/09)--Treasury Secretary Timothy Geithner took financial regulators to task when they voiced objections to the Obama administration’s plan to revamp the financial system. Geithner told them that they are somewhat responsible for the financial crisis and their objections are “playing into the hands” of financial industry groups trying to stop the plan (The New York Times Aug. 6). Geithner said Wednesday that he’s confident Congress will accept the plan and he understands that regulators are trying to preserve their jurisdiction. But the regulators can’t lose sight of the plan’s objective to revamp the financial system just because of a few policy differences. Regulators should not let efforts to defend their turf take away from getting the legislation passed, Geithner said ... * WASHINGTON (8/7/09)--Federal Housing Finance Agency (FHFA) Director James Lockhart is set to resign soon and his departure could stir up questions about whether the government-sponsored enterprises, which the FHFA supervises, should be reformed. Fannie Mae and Freddie Mac have three options--nationalization, privatization or remaining the same (American Banker Aug. 6). Lockhart’s departure would mark another change in leadership for Fannie and Freddie, who have had three CEOs in three years. But financial observers said they didn’t think the leadership change would cause a problem. Brian Harris, Moody’s Investors Service analyst, said the GSEs have a lot of government support, so the leadership changes shouldn’t create instability. Ed DeMarco, FHFA senior deputy director and CEO, is expected to take over the agency on an interim basis until candidates for a permanent replacement are found ... * WASHINGTON (8/7/09)--Senate Banking Committee members at a Wednesday hearing on credit ratings agencies criticized some of the Obama administration's regulatory proposals, saying that they do not do enough to ensure that ratings agencies verify information supplied to them by their customers. American Banker on Thursday reported that committee chairman Sen. Chris Dodd (D-Conn.) was “stunned” to learn that credit ratings agencies do not fact check the information reported to them by customers. Dodd also expressed dismay that the administration’s proposal, as currently crafted, would not require the agencies to take additional due diligence measures, but Treasury assistant secretary for financial institutions Michael Barr said that expanding due diligence rules for the agencies would lead to the government dictating the agencies' methodology. Sen. Charles Schumer (D-N.Y.) during the hearing proposed that the Securities and Exchange Commission could help eliminate some conflicts of interest that occur in the credit rating system by randomly selecting securities to receive a second rating from a separate agency...

NCUA webinar will detail present future states of CLF

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ALEXANDRIA, Va. (8/7/09)--The National Credit Union Administration (NCUA) on Monday will hold a webinar to discuss recent changes to the structure and operations of the Central Liquidity Facility. The webinar, which will be hosted by CLF President J. Owen Cole, will take place at 2 p.m. on Monday and will offer credit unions an opportunity to speak directly with the NCUA via a question and answer session. Cole will also discuss some of the near-term changes to the CLF that are currently under consideration during the webinar. The NCUA last week announced that it transferred $1.8 billion in CLF funds from U.S. Central Federal Credit Union to the U.S. Treasury. The NCUA at that time said that it is also exploring "alternatives regarding the transfer of primary ownership of CLF stock from [U.S. Central] to other credit unions or groups of credit unions through the anticipated reforms to the corporate network." Interested parties can register for the webinar at

CUNA doc helps CUs cope with CARD Act regs

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WASHINGTON (8/6/09)—The Credit Union National Association (CUNA) is working for legislative or regulatory relief for the by-now-well-known 21-day notice provisions for open-end credit plans, other than credit cards set, set to take effect Aug. 20. Meanwhile, however, CUNA has created a compendium of information to help credit unions tackle the “horrendous” compliance challenges that loom ahead. As a cure, CUNA is seeking a law change so the notice provision would apply only to credit cards. Concurrently, CUNA is addressing the problem via a regulatory route urging the Federal Reserve Board to approve a compliance date delay. The Fed rule implements provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009. In the memo, CUNA details steps that credit unions must take to comply with the 21-day requirement and the 45-day change-in-terms requirement. CUNA provides an overview of these regulatory requirements, provides information on some of the alternative approaches that credit unions are considering, and addresses some of the more frequent questions that have been asked about the regulations. While CUNA does not specifically advocate or suggest any method of complying with the 21-day requirement, the memo does present a number of options that have been taken by some credit unions, including changing due dates to establish a uniform payment due date, printing the current and following month's payment due dates on the account user’s periodic statement, and retaining the existing due dates, but providing additional periodic statements. CUNA has also provided answers to which types of loans are covered by the 21-day requirement, how the 21-day period is determined, and which actions a credit union could take to assure delivery when a member has decided to use electronic periodic statements. For access to the document, use the resource link.

NCUA opines on abandoned real estate sales requirements

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ALEXANDRIA, Va. (8/6/09)--Federal credit unions that list abandoned properties that are under their possession as “for sale” through a real estate broker and/or a real estate listing service will meet portions of the National Credit Union Administration’s (NCUA) fixed asset rule that require FCUs to publicly advertise their abandoned properties for four years after they are acquired, according to a recent NCUA legal opinion letter. Under the NCUA rules, abandoned property refers to “real property an FCU is no longer using” and can include property that was purchased by the FCU with the intention of expanding the financial institution, NCUA Associate General Counsel Sheila Albin wrote. The rule, which generally limits FCUs investment practices in fixed assets, specifically requires FCUs to publicly advertise any property that has been abandoned for four years and requires that property to be sold within five years. However, Albin wrote, the NCUA can grant extensions to FCUs. The rule also requires FCUs to “make diligent efforts to dispose of and seek fair market value for abandoned property,” some of which could be beyond the scope of simply listing the property with public signage or with an agent. To read the complete letter, use the resource link.

Comment on flood insurance guidance changes sought CUNA

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WASHINGTON (8/6/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on recently proposed additions to a series of flood insurance-related questions and answers that are provided by the National Credit Union Administration (NCUA) and other financial regulators. The new content, which addresses, among other items, second lien mortgages, civil money penalties, loan participation, construction loans, insurable value calculations, are a response to public comments to the agencies, and will both address new areas and clarify some existing guidance. The U.S. House also recently agreed to extend the National Flood Insurance Program, which was set to expire on Sept. 30 of this year, through March 31, 2010. The Senate has not yet voted on the proposed extension. CUNA is asking credit unions to list their concerns regarding proposed changes to the guidance on replacement cost valuations and provisions for implementing force placement insurance when a previous insurance policy has lapsed. The Q&A revisions will become effective on Sept. 21. The NCUA will also accept comments regarding the new Q&A additions until this date. Comments are due to CUNA by September 10. For more information, use the link.

Inside Washington (08/05/2009)

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* NAPERVILLE, Ill. (8/6/09)--Speaking before the Illinois Credit Union Leagues Small Asset Size Conference, in Naperville, Ill., National Credit Union Administration Chairman Michael E. Fryzel noted the historical importance of small credit unions to the industry overall. While commending the Illinois League for its educational work and its assistance to small credit unions, Fryzel commented that while smaller CUs can be challenged by the “competitive pressures, financial market turmoil and constant technological changes” of the financial system. However, Fryzel said that in spite of those challenges, small credit unions are “closer” to their members, have a “more immediate relationship” than many of their larger counterparts, “and have the ability to adapt and manage change as well as any other group in the credit union movement…” * WASHINGTON (8/6/09)--A Senate panel Tuesday discussed the feasibility of a single banking regulator. The Obama administration has proposed spreading the oversight of banks over several agencies. Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair said consolidating regulators may not solve the problems that caused the financial crisis. John Bowman, acting director of the Office of Thrift Supervision, also said he opposed a single regulator. Comptroller of the Currency John Dugan and Federal Reserve Board Gov. Dan Tarullo said they were open to consolidation, but Tarullo warned that a single regulator could mean that some agencies--like the Fed--would lose insight into how banks are functioning. On June 17, the Treasury issued a report on the financial regulatory system indicating that it would allow the National Credit Union Administration (NCUA) to maintain its safety and soundness authority over credit unions ... * WASHINGTON (8/6/09)--The Securities and Exchange Commission (SEC) is working to curb flash trading, which occurs when buy and sell orders are shown to high-frequency traders before the orders are passed onto others (The New York Times Aug. 5). The orders are shown for 30 milliseconds, but are perceived to give some investors an unfair edge over other investors. Sen. Charles Schumer (D-N.Y.) said he wants to know if investors are using the technology for gaming markets. He has threatened to introduce legislation that would eliminate flash orders. The SEC also could introduce rules to prevent dark pools--which are only open to select investors ... * WASHINGTON (8/6/09)--The Treasury said Wednesday it will issue more inflation-protected securities--TIPS--to encourage investors to buy the debt the Treasury needs to sell to help the economy. Treasury also said it could replace 20-year TIPS with 30-year TIPS, which would create more liquidity (Reuters Aug. 5). China holds most of the U.S. government’s debt and has indicated that it would buy more securities. Issuing more TIPS is one way the Treasury is reviewing help to the budget deficit (The Wall Street Journal Aug. 5) ...

IRS issues a new UBIT opinion

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WASHINGTON (8/5/09)—The Internal Revenue Service (IRS) has released a new Technical Advice Memorandum (TAM) stating that income derived by state-chartered credit unions from shared-branching arrangements, management services to other credit unions, certain CUSOs, and sales of financial management services and certain insurance products are subject to unrelated business income tax (UBIT). “We think this decision is clearly erroneous on multiple levels. Most basically, it fails to recognize the cooperative, interdependent nature of the credit union system as reflected in shared branching and management of one credit union by another,” said Eric Richard Tuesday. Richard is general counsel of the Credit Union National Association (CUNA). Richard also pointed out that the new TAM does not sufficiently analyze whether particular functions of credit union service organizations further the purposes of credit unions, which “should be the test of tax exemption.” This new UBIT TAM is the first such memorandum issued by the tax agency since it sent out a spate of such opinions in 2007. Two credit unions have filed suit against the IRS over its UBIT policies. Community First CU, based in Appleton, Wis., filed suit in January 2008 against the government after the IRS determined that certain guaranteed auto protection (GAP) and insurance products offered to members fall outside the credit union's main mission and are subject to UBIT. The credit union sought a $54,604 refund and a jury in May of this year found in the credit union’s favor. The latest TAM was drafted before the decision in the Community First case was issued. Bellco CU, Greenwood Village, Colo., also has filed a complaint against the IRS, seeking a refund of $199,000, based on UBIT taxes paid for 2000, 2001 and 2003. “The parts of this newest UBIT decision that deal with credit life and disability are at odds with the jury's decision in Community First, but this TAM was in the works long before that decision came down. It was officially issued to the credit union and the IRS agent in the applicable state in May, before the Community First trial,” CUNA’s Richard said. “Hence, even though the timing might look suspicious to outside observers, this TAM cannot be treated as a response to the Community First verdict,” he added. The CUNA UBIT Steering Committee will meet this week to discuss its next steps in UBIT strategy.

CUNA Overdraft plans consistent with CU mission

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WASHINGTON (8/5/09)—While a story in USA Today on Tuesday took issue with credit union overdraft protection programs, Credit Union National Association (CUNA) President/CEO Dan Mica explained that the programs are consistent with credit unions’ philosophy and mission to meet members’ financial needs and resolve short-term financial problems. Mica noted that, in the wake of the story, it is important for credit unions to communicate that overdraft programs are a way that mainstream lenders like credit unions can help consumers with a lower-cost option to such outlets as payday lenders and pawn shops. “Credit unions that charge fees for the programs do so in order to make the business model work on a service that a number of their members value and are willing to pay for,” Mica said, adding: “But the fact is, credit unions generally offer this service to save members the high cost and embarrassment of a bounced check." Typically, credit unions charge around $25 for an overdraft protection fee, while cumulative bounced check costs, including fees charged by merchants receiving the "bad" check, run as high as $50-$85 oer check. Both federal lawmakers and regulators are looking at financial institutions’ overdraft protections plans to determine is greater consumer protections are needed. For instance, in March Rep. Carolyn Maloney (D-N.Y.) asked her House colleagues to support a 2009 version of her earlier overdraft bill that failed to pass, the Consumer Overdraft Protection Fair Practices Act (H.R. 946). As CUNA has testified on Capitol Hill this year, CUNA staunchly backs intention to eliminate abusive practices associated with some bounce protection plans, but insists any law must create an equitable balance between those protections and the needs of service providers to be fairly compensated for the service and not subjected to unnecessary regulatory burdens.

Inside Washington (08/04/2009)

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* WASHINGTON (8/5/09)--The Federal Deposit Insurance Corp. (FDIC) issued a letter Monday urging financial institutions to look at potential loan losses. Each institution should “analyze the collectibility of its loans held for investment and maintain an allowance for loan and lease losses. After determining the appropriate historical loss rate for each group, management should consider those current qualitative or environmental factors that are likely to cause the estimated credit losses on the loans,” FDIC said. Failure to recognize losses could delay loss mitigation activity--such as restructuring junior lien loans to more affordable payments or reducing principal on such loans, the agency warned ...

Hood Highlights of NCUA tenure

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ALEXANDRIA, Va. (8/5/09)—Rodney Hood, recently reflecting on his term as National Credit Union Administration (NCUA) vice chairman, told News Now that he believes one of his unique contributions to the NCUA and credit unions was bringing about a culture of enterprise risk management to the board and to the system overall.
Click to view larger imageNCUA vice chairman Rodney Hood, who will leave the board once Deborah Matz has been confirmed, urged credit unions to "tell their story" to draw new members to their ranks.
Hood, who in late 2005 took the spot vacated by former NCUA Chairman Dennis Dollar, agreed to stay past his terms expiration date of April 10, 2009 until a new board member is confirmed. As Deborah Matz’s expected confirmation to the agency nears, Hood talked to the Credit Union National Association’s News Now about his board tenure. With the end of his term in sight, Hood urged credit unions to “continue to tell their story, to market their products, and to serve their members,” adding that now is the time to build on the positive momentum gained by recent increases in new share accounts and share deposits to grow market share for their institutions. Hood during the interview also hailed the success of the Blueprint 2020 program, which he marked as another hallmark of his time on the board. The program, which works with universities to create marketing, accounting, and other opportunities for interested college interns, is a “wonderful way of injecting talent into our system” and helps provide a succession plan for credit unions by bringing young people into the credit union movement as employees or, at a minimum, as members. The NCUA has also applied some of the lessons learned from the program to its own internship practices, according to Hood. While he admitted that there is still “a lot to be done” regarding the need for diversity within the credit union system, the NCUA can address this subject by “leading by example.” The fact that credit unions were “well positioned” coming into the current economic turbulence is helping them sustain themselves through what can be tough times. Still, Hood said, credit unions continue to do well in spite of the difficulties, with the number of shares in credit unions and, more generally, membership increasing as people hear about the failures of other financial institutions and opt to join a credit union. Recent improvements to the NCUA’s Centralized Liquidity Facility and the creation of a corporate stabilization fund will also help credit unions continue to serve their membership going forward, he said. While he supports the goal of consumer financial protections, Hood said that he is “troubled” by aspects of the proposed Consumer Financial Protection Agency that would take away some of the teeth from existing regulators. “I don’t see how this new group is going to be more effective than the groups” that work with institutions on a “day to day basis,” he added. Still, Hood said that “it bodes well” that the NCUA will remain independent under proposed changes to the federal financial regulatory structure, adding that the decision to allow the NCUA to retain its independence confirms that credit unions were not part of the problems that created the current financial difficulties. Hood said he is “excited” about welcoming Matz, who previously served on the board from 2002 until 2005, back to the NCUA. Hood said that the Obama administration’s nominee is an “excellent advocate for credit unions” who is “very attuned to the issues” that credit unions are facing. Hood said that he is currently exploring opportunities in the private sector, adding that he’s looking to stay in the financial services industry. News Now will also feature a discussion with NCUA board member Gigi Hyland in the near future.

Inside Washington (08/03/2009)

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* WASHINGTON (8/4/09)--Rep. Carolyn Maloney (D-N.Y.), has introduced the Mutual Holding Company Beneficial Owners’ Protection Act of 2009 (H.R. 3291), which would preserve the rights of public shareholders to vote on the stock benefit awards to members of the mutual holding companies' boards of directors. The bill was introduced in response to a 2008 ruling by the Office of Thrift Supervision (OTS) that restricts the rights of public shareholders. “In an era when we are seeking to provide shareholders more say in the compensation structure of executives, I simply cannot understand how the OTS could rule to further limit the rights of shareholders of mutual holding companies,” Maloney said in a statement ... * WASHINGTON (8/4/09)--The Federal Deposit Insurance Corp. (FDIC) took the next step in the development of the Legacy Loans Program (LLP) through the auction of toxic assets from a failed financial institution. The agency did not provide details about the institution involved in the auction but noted that the first test using the LLP funding mechanism commenced last week. In the transaction to be offered, the receivership will transfer a portfolio of residential mortgage loans on a servicing released basis to a limited liability company (LLC) in exchange for an ownership interest in the LLC. The LLC also will sell an equity interest to an accredited investor, who will be responsible for managing the portfolio of mortgage loans ... * WASHINGTON (8/4/09)--Esther George has been picked by the Federal Reserve Board to temporarily serve as director of the Fed’s supervision and regulation division while the central bank seeks a permanent director (American Banker Aug. 3). George will succeed Roger Cole, who is retiring. Before being picked as director, George had been promoted to first vice president of the Federal Reserve Bank of Kansas City. Prior to her promotion, she was senior vice president for supervision and risk management at the Kansas Fed. She has experience overseeing discount window lending ...

CUNA NASCUS Exempt state CUs from FTC mortgage power

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WASHINGTON (8/4/09)--The Credit Union National Association and the National Association of State Credit Union Supervisors (NASCUS) in separate comment letters have asked the Federal Trade Commission (FTC) to exempt state-chartered credit unions from expanded FTC mortgage power that was granted in the 2009 Omnibus Appropriation bill. Both comment letters are responses to the FTC’s recent advance notice of proposed rulemaking (ANPR) which asked whether the FTC should restrict or prohibit some advertising, marketing, loan origination, appraisal, and loan servicing practices related to the mortgage loan process. In the comment letter, CUNA said that while the FTC should continue its rulemaking process as it attempts to address predatory lending and the general mortgage loan process, any rules that are developed “should not be imposed on state-chartered credit unions that are subject to the FTC’s jurisdiction under the FTC Act as credit unions have not been the source of the problems that these rules would address.” Applying these rules to state-chartered CU’s would also “needlessly” subject them to regulatory burdens that create additional compliance costs. CUNA would prefer that the FTC develop rules that “address practices in which either current state or federal law is silent or if an entity is otherwise unsupervised.” CUNA also cautioned against “prohibiting or favoring certain types of loans,” including some types of variable rate mortgage loans. NASCUS mirrored CUNA’s sentiments in a press release, objecting to the rule’s coverage of state-chartered credit unions and adding that the already “highly regulated” state credit unions “would suffer a disparate impact in the marketplace with little offsetting benefit to consumers if only state-charters are subject to this rule.” To see CUNA’s comment letter, use the resource link.

Keep higher SBA limits for good of economy says CUNA

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WASHINGTON (8/4/09)--The Credit Union National Association supports proposed changes to the U.S. Small Business Administration’s (SBA) 7(a) Business Loan Program, saying in a letter sent Monday that changes in the size criteria would help alleviate the economic crisis in some measure by facilitating lending to a greater number of small businesses. The SBA’s revised rule would extend 7(a) loans to small businesses with a net worth of $8.5 million or less. The change will stand until Sept. 30, 2010, but CUNA has urged the SBA to make this change permanent before that time. The amendments to the 7(a) program are estimated to grant eligibility to as many as 70,000 additional small businesses, and CUNA has praised the current program and other SBA programs as being “very helpful for credit unions in their efforts to provide credit to their members who own small businesses.” CUNA has also lobbied on behalf of lifting the cap on member business lending (MBL), a move that could inject as much as $10 billion in funds. Rep Paul Kanjorski (D-Pa.) recently introduced legislation that would double the current MBL cap of 12.25% of assets. The cap would not apply to loans of less than $250,000, business loans in underserved areas, and loans to non-profit religious institutions under Kanjorski’s legislation. CUNA also pledged to work with the SBA and legislators to address additional limitations on SBA lending program fees and to ensure that the SBA has the staff needed to properly “review loan applications, process guarantee payments to lenders, and handle other problems that arise with specific lenders.” For CUNA's letter to the SBA, use the resource link.

Congress Senate hearings on banking ratings on tap

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WASHINGTON (8/4/09)--Although many House members have now left Washington for their yearly summer district work period, the Senate will remain busy this week, with several finance-related hearings planned. The first item on the Senate agenda that is of interest to credit unions is a Tuesday hearing before the Senate Banking Committee, entitled "Strengthening and Streamlining Prudential Banking Supervision.” Federal Deposit Insurance Corporation Chairman Sheila Bair, Comptroller of the Currency John Dugan, Federal Reserve Governor Daniel Tarullo and Office of Thrift Supervision Director John Bowman are scheduled to testify, with testimony from additional witnesses set to follow on a separate panel. The committee will also examine proposals to enhance credit rating agency oversight on Wednesday, witnesses to be announced. There is not a scheduled vote on the confirmation of Deborah Matz to join the National Credit Union Administration, but the Senate could add that vote to the agenda this week. Matz is expected to pass via unanimous consent once the vote takes place. While the House left Washington a week ahead of the Senate, the House Small Business Committee subcommittee on finance and tax on Tuesday will hold a hearing on easing small businesses' access capital. The hearing will take place in Salem, Ore. and Rick Hein, president and CEO of Corvallis, Ore.-based OSU FCU, will testify for the Credit Union Association of Oregon.

FHFAs latest foreclosure report (08/03/2009)

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WASHINGTON (8/4/09)--The Federal Housing Finance Agency (FHFA), regulatory overseer of Freddie Mac and Fannie Mae and the 12 Federal Home Loan Banks, released its May monthly foreclosure report Monday, revealing its most recent information available on mortgage delinquencies and foreclosures. The monthly information does not include data on refinancings or modifications from the Obama administration’s Making Home Affordable Program (HAMP). The FHFA reports that as of May 31, of the government-sponsored enterprises’ 30 million residential mortgages:
* There was a decline in completed loan modifications for the second consecutive month, to approximately 10,400. The FHFA said the drop occurred as Freddie and Fannie “continue to focus on implementing the Home Affordable Modification Program (HAMP),” which requires a three-month trial period for the borrower to demonstrate the ability and willingness to make modified payments; * Loan modifications accounted for 47% of all completed foreclosure prevention actions in May. The majority of loans modified in May involved both rate reductions and term extensions; * There was a 3% increase in completed short sales to nearly 3,700. The FHFA said that represents more than three times the volume of one year earlier; and * Delinquencies continued to increase as approximately 80,100 more loans became 60 days or more delinquent in May. Those loans increased approximately 7% to 1.3 million.
The FHFA said that loss of income continues to be the top reason for delinquency, cited by 40% of borrowers in May, up from 34% in January. The agency also reported that foreclosure starts jumped 5% compared with April, to nearly 90,600, from processing of non-owner occupied properties and properties determined to be ineligible for HAMP. Use the resource link below to access the FHFA report.

GAO looks at nonprime loan bill

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WASHINGTON (8/4/09)—The Government Accountability Office (GAO) recently studied a 2007 mortgage reform bill (H.R. 3915), which was introduced but not passed, and evaluated what the long-term impact of the bill would have been if enacted. The report also dipped into the history of nonprime loans and revealed that almost 75% of securitized nonprime mortgages originated from 2000 through 2007 would not have met H.R. 3915's safe harbor requirements. Those requirements included such things as full documentation of a borrower’s income and assets and a prohibition on mortgages for which the loan principal can increase over time. The extent to which mortgages met specific safe harbor requirements varied by origination year, the GAO noted, citing for example the percentage of nonprime mortgages with less than full documentation rose from 27% in 2000 to almost 60% in 2007. “Consistent with the consumer protection purpose of the bill, GAO found that certain variables associated with the safe harbor requirements influenced the probability of a loan entering default (i.e., 90 or more days delinquent or in foreclosure) within 24 months of origination,” the report summary said. All other factors being equal, GAO said its statistical analysis showed a five percentage point increase in the likelihood of defaults for “the most common type of nonprime mortgage product.” The potential long-term impact of the bill, which was the topic of the report, is disputed, the GAO said. The mortgage industry generally stated that some of the bill’s provisions would limit mortgage options and increase the cost of credit for nonprime borrowers. Consumer groups, for the most part, argued a need that the provisions be strengthened to protect consumers from predatory loan products. The GAO is the audit, evaluation, and investigative arm of the U.S. Congress and generally executes studies requested by members.

NCUA bars six from further finance work

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ALEXANDRIA, Va. (8/4/09)--The National Credit Union Administration (NCUA) announced that it has barred six individuals from participating in the affairs of any federally insured financial institution. Under the order, individuals that have taken part in a range of crimes, from embezzling to tax fraud, would be forced to pay as much as $1 million in fines and face possible imprisonment if this prohibition is violated. Included on the list are former credit union employees Rhonda Campbell, of Lima, Ohio’s North Star FCU, and Sacramento, Calif.-based Capital Power CU’s Richard James Ditzel, as well as former Financial One CU President Richard Lange, all of whom were convicted of embezzlement, and have been forced to serve significant jail time and hundreds of thousands of dollars in restitution for their crimes. Ditzel’s sentence is the most significant of the three, with the former CU employee set to serve 33 months of jail time and pay nearly $500,000 in restitution. Lange will pay $249,691 in restitution and serve a 21-month jail term, with three years of probation to follow, for embezzlement and filing false tax returns. Rebecca Andino, Sharon Quattrone, and Hyacinth Richardson are also barred from further involvement with federally insured financial firms due to their activities. Andino, who was formerly employed by Southern Delaware Postal Employees FCU, is serving six months of work release, with a further 12 months of probation and $54,800 in restitution, following her conviction for theft. Quattrone, who was formerly an employee of CCSE FCU in New York, was sentenced to three years of supervised release for making a false statement to a federal credit union. Richardson has signed an order of prohibition, and did not admit nor deny fault for alleged wrongdoing during her time at Mid Island FCU, St. Croix, Virgin Islands. Her charges were not disclosed by the NCUA. For the full NCUA release, use the resource link.