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Washington Archive

Washington

NEW: NCUA Issues Guidance On Loan Participation Rule

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WASHINGTON (9/19/13, UPDATED 5:32 p.m. ET)--The effective date for the National Credit Union Administration's new loan participation regulation is almost at hand--Sept. 23--and the agency today issued supervisory guidance on the rule.
 
In Letter to Credit Unions 13-CU-07, the agency stated, "Loan participations strengthen the credit union industry by providing a useful way for credit unions to diversify their loan portfolios, improve earnings, distribute liquidity across the industry, and balance loan demand.  However, as with any loans generated by third parties that are not federally guaranteed, loan participations come with risks."
 
In additions to the intention of the rule, the letter describes its reach and its provisions.  It also noted that NCUA examiners this week received supervisory guidance on the revised rule--including the process by which credit unions may obtain waivers.
 
The new loan participation rule features many improvements suggested by the Credit Union National Association even though CUNA did not support any new loan participation rule at this time. For instance, the original effective date was July 25, but CUNA strongly urged the agency to give credit unions more time to adequately prepare for the rule's changes.
 
The final rule sets a limit on loans from one originator of 100% of a credit union's net worth. This is up from a proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower.

CUNA urged such changes and the CUNA board emphasized credit union concerns as it worked to make the rule more practicable.

2014 CUNA GAC Is Feb. 23-27

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WASHINGTON (9/19/13)--The Credit Union National Association announced today that its 2014 Governmental Affairs Conference will be held in Washington, D.C. from Feb. 23-27 and registration is open. CUNA President/CEO Bill Cheney urged all member credit unions to use this one-year anniversary of CUNA's launch of the Unite for Good vision as a rallying point for the credit union system to accomplish an unprecedented "boots on the ground" presence in Washington.   It was at last year's GAC, considered the credit union movement's premier national
Click to view larger image Credit Union National Association President/CEO Bill Cheney launches "Unite for Good" at the CUNA 2013 GAC, a vision where Americans choose credit unions as their best financial partner and the credit union system works collaboratively to advance three broad goals: To remove barriers, raise awareness and foster service excellence. (CUNA Photo)
conference, that CUNA and the state credit union leagues presented a bold new, overarching strategic vision for the credit union movement: A vision in which "Americans choose credit unions as their best financial partner."
 
"We have great momentum behind our shared vision. In February we will continue the push forward," Cheney said.
 
He emphasized that with the credit union tax status in peril as Washington policymakers considered tax code reforms, and with banks executing attacks on credit unions at every chance, credit unions must take this opportunity to show their numbers to all members of the U.S. Congress.
 
"We need to rally the biggest GAC crowd yet to take part in Capitol Hill visits and share the story of the credit union difference. We need you to join your peers and Unite for Good," Cheney urged.
 
Recognized as the key conference to attend for political impact, credit union networking and industry updates, the GAC also offers a wide array of educational breakout sessions, the industry's largest exhibitor showcase, guest/family programs to tour Washington's sights, and special entertainment including an opening concert and the closing Gala Reception and Dance.
 
Registration is now open and keynote and other speakers and session topics will be announced in the weeks to come. For more information, follow the @CUNA on Twitter and the hashtag #CUNAGAC, and watch News Now for details.
 
Use the resource link to register.

NEW: Court Acts On Fed, Merchant Interchange Request

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WASHINGTON (9/19/13, UPDATED 5:15 p.m. ET)--The U.S. Court of Appeals for the District of Columbia has moved quickly to approve the request for expedited action on the Federal Reserve Board's appeal in the case known as NACS v. Board of Governors of the Federal Reserve System. The motion was just filed today.
 
As background, the merchant plaintiffs and the defendant Federal Reserve Board had filed an emergency motion today asking the court of appeals for expedited action in the case.
 
Specifically, the merchants and Fed asked that the court to move quickly on the Fed's appeal that attempts to overturn a lower court ruling that the regulator's implementation of the Dodd-Frank Act debit card interchange fee was faulty and should be scrapped.
 
The calendar set by the court is as follows:
  • Brief for Federal Reserve 10/21/13;
  • Joint Brief for Amici in Support of Federal Reserve 10/21/13;
  • Joint Brief for Merchants 11/20/13;
  •  Brief(s) for Amici in Support of Merchants 11/20/13; and
  • Reply Brief for Federal Reserve 12/04/13.

Nov. 18 Is Fixed-asset Rule Effective Date

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WASHINGTON (9/19/13)--Changes to the National Credit Union Administration's fixed-asset rule, adopted at its Sept. 12 open board meeting, will go into effect Nov. 18, according to a document published in the Wednesday Federal Register.
 
The Credit Union National Association supported the amendments to the regulation governing federal credit union ownership of fixed-assets.  Although the new final rule does not make any substantive changes to regulatory requirements, CUNA has said that the plain language revisions, new definitions and revised wording could help credit unions with their compliance efforts.
 
Overall, the rule allows federal credit unions to purchase, hold and dispose of property necessary or incidental to their operations. These fixed assets include office buildings, branch facilities, furniture, computer hardware and software, and ATMs.

The NCUA has said the rule changes will also offer greater flexibility to federal credit unions. "Those that receive a waiver from the 5% fixed-assets limit will have the ability to make multiple purchases of fixed assets within a 1% buffer above their approved waiver limit. This change is intended to eliminate the need for a federal credit union to make repeated waiver requests for minor acquisitions," the agency wrote in its proposal document.

Use the resource link to access the Federal Register document.

Matz Announces NCUA Will Propose Stress Testing Rule

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COEUR D'ALENE, Idaho (9/19/13)--National Credit Union Administration Chairman Debbie Matz announced Wednesday that the agency's Office of National Examinations and Supervision is drafting a requirement for annual stress tests at credit unions with assets exceeding $10 billion.

Matz said stress testing would be part of the NCUA's "coordinated approach" to supervision of a changing industry with asset growth concentrated in large credit unions. Stress testing of federally insured credit unions with state charters would be conducted in consultation with the state regulator.

The shocks used in the stress testing would be based on scenarios issued annually by the Federal Reserve, with adjustments for differences between banks and credit unions, Matz said.

Speaking at the National Association of State Credit Union Supervisors' annual State System Summit, Matz noted that the agency is likely to issue the proposed rule for public comment before the end of the year.

"At NCUA, we need to utilize all the tools at our disposal to look ahead in order to protect the industry in the future," Matz said. "Stress tests are forward-looking measures. They're designed to determine whether an institution is holding an adequate capital cushion to survive adverse scenarios and to allow credit unions to make adjustments before a crisis hits."

Now that the agency has made public its plan to pursue a new rule in this area, the Credit Union National Association will be talking with affected credit unions and NCUA officials to minimize the impact and contain regulatory burdens.

The Dodd-Frank Act requires certain financial firms with more than $10 billion in assets to conduct annual stress tests. Matz noted that stress testing is just as important for credit unions of comparable size.

A credit union that fails a stress test would be required to revise its capital plan to demonstrate how it would meet minimum stress test capital ratios, an agency release said.  A credit union that passes the test would benefit from the analysis by identifying potential improvements in its enterprise risk management system.

Matz said one issue still being reviewed is whether stress test results would be publicly available. She noted banks are required to disclose their results, but banks are publicly traded entities, unlike credit unions.

She said public disclosure would enhance transparency to members but results could also be misinterpreted and lead to inaccurate conclusions about a credit union's current stability.

CUNA Says NACHA 'Reason Code' Plan Could Clear Confusion

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WASHINGTON (9/19/13)--The Credit Union National Association backs initiatives to minimize compliance costs for credit unions and other financial institutions, as well as clarifications to rules on the Automated Clearing House (ACH) network, and for those reasons supports an Electronic Payments Association (NACHA) proposal that would amend reason codes for returned entries.
 
The proposed changes would clarify that:
  • Receiving Depository Financial Institutions (RDFIs) should use Code R03 if they choose to return an entry because the receiver's name on the entry does not match the name on the account; and
  • RDFIs should use Code R04 if they choose to return an entry due to account number issues.
"We believe these technical changes would benefit ACH participants by reducing ambiguity currently associated with these return reason codes and improve processing efficiency for financial institutions," wrote Dennis Tsang, CUNA assistant general counsel, in a Sept. 17 CUNA Comment Letter.
 
"Some credit unions already use these return reason codes in a manner that is similar to the proposed rules," he noted.
 
In addition to reducing ambiguity, NACHA has said its proposed technical amendments also would improve processing efficiency for RDFIs and Originating Depository Financial Institutions.

The proposed changes, if adopted, will go into effect March 20, 2015. NACHA is accepting comment through Sept. 20.

HMDA Report Shows 2012 Reporting Down, Mortgage Lending Up

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WASHINGTON (9/19/13)--The Federal Financial Institutions Examination Council (FFIEC) Wednesday released data on the mortgage applications, originations, purchases, and denials that were filed in 2012 by credit unions and other financial institutions under the Home Mortgage Disclosure Act (HMDA).

The FFIEC reported that the total number of reporting intuitions has fallen, while mortgage lending is up. The 7,400 reporting institutions for 2012 is a 3% drop from 2011,  a decline the regulators attributed to the result of mergers, acquisitions and failures.

The total number of originated loans of all types increased by about 2.7 million, or 38%, from 2011, and that jump was attributed, in part, to a 54% increase in the number of refinancing. Home purchase lending also increased, but by a more modest 13%.

The FFIEC report also noted:
  • Since 2006, homebuyers have continued to be reliant on government-backed mortgages, such as those insured by the Federal Housing Administration (FHA) or the Veterans Administration (VA);
  • Although the shares of FHA- and VA-backed loans in the refinance market are much smaller than conventional loans, they experienced more growth from 2011 to 2012; and
  • Among refinancings, conventional loans increased about 51% from 2011 to 2012, while those backed by FHA insurance increased 78% and VA guarantees increased 90%.

The 2012 HMDA data are the first to use population and housing characteristic estimates from the 2010 Census. With regard to race, similar to previous years, the latest data showed applications for conventional home-purchase loans in 2012 from black and Hispanic white applicants experienced higher denial rates than non-Hispanic white applicants, while denial rate for Asian applicants was virtually the same as non-Hispanic white applicants.

HMDA was passed in 1979 to help monitor if financial institutions are serving the housing needs of their communities and to identify any potential discriminatory mortgage lending practices.

Under HDMA, credit unions and other financial institutions with total assets of less than $42 million as of Dec. 31, 2012 will not need to collect and report the data in 2013.

The Credit Union National Association is reviewing the extensive HMDA data and its analysis will be available to News Now readers, likely next week.

The FFIEC is comprised of the heads of the National Credit Union Administration, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Consumer Financial Protection Bureau, the Council's State Liaison Committee, and a member of the Federal Reserve Board.

Use the resource link below for the full disclosure of the HMDA data.

Consumers Can Explore Annual HMDA Info Through New CFPB Tool

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WASHINGTON (9/19/13)--The Consumer Financial Protection Bureau (CFPB) announced yesterday a new Web-based tool that has been launched to help consumers easily navigate complex public mortgage data collected by the Home Mortgage Disclosure Act (HMDA).

It is the complexity of the information that inspired the tool's creation.
The Consumer Financial Protection Bureau's new Web-based tool for consumers helps draws a clearer picture of mortgage lending trends.

"Our tool addresses this reality by putting valuable information into the hands of the public in an accessible way, so they can understand what is actually happening in their local mortgage markets and over time they will be able to see trends and changes developing," said the director of the CFPB, Richard Cordray, in remarks prepared for the Wednesday CFPB Consumer Advisory Board meeting in Itta Bena, Miss.

The CFPB states the tool organizes the 18.7 million records from the 7,400 financial institutions that HDMA collects from and translates the data into an easily understood and simple form for consumers to use. (See related story: HMDA Report Shows 2012 Reporting Down, Mortgage Lending Up.)

"By helping get this valuable information into the hands of consumers in accessible formats, they will more easily understand what is happening in their communities, because, again, these markets can be so very different from one place to another," Cordray went on to say.

"We simply do not have one national real estate market in this country; nor do we have 50 state markets. Instead, we have a very large number of localized markets that may act quite differently from one another at any given time, for a variety of reasons that can be hard to identify and hard to explain." 
The data collected by the HDMA has always been public for consumers and lawmakers to read; however, the size and complexity of the information have been a deterrent for many to use the data to its full capacity. The new tool will take the figures and form it into digestible information that everyone can understand and use.

Use the resource link below to experience the new tool.

NEW: Fed, Merchants Seek Expedited Court Action On Interchange Appeal

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WASHINGTON (9/19/13, UPDATED 3:49 p.m. ET)--The merchant plaintiffs in the debit card interchange lawsuit known as NACS v. Board of Governors of the Federal Reserve System and the defendant Fed have filed jointly an emergency motion asking the U.S. Court of Appeals for the District of Columbia Circuit to expedite action in the case.
 
Specifically, the parties are asking the D.C. Circuit court to move quickly on the Fed's appeal that attempts to overturn a lower court ruling that the regulator's implementation of the Dodd-Frank Act debit card interchange fee was faulty and should be scrapped.
 
In the emergency motion the merchants assert that every day that the existing final rule is left in place potentially causes merchants "irreparable injury" because the cap is too high.
 
The Fed argues that expedited treatment is necessary because to vacate the existing rule before a resolution of the appeal "would eliminate the existing regulatory limits on the amount of fees that merchants can be required to pay in connection with each debit card transaction subject to the rule and thus allow the unrestrained imposition of fees by card networks and issuers on the businesses that accept debit cards--precisely the practice that the statute sought to prevent."  The Fed further claims that expedited treatment is necessary to provide "timely guidance and certainty about the rules and procedures governing the millions of debit card transactions being conducted every day--a matter of unusual public interest." 

The Fed said it could not adopt an interim regulation while the appeal is pending without mooting the appeal. A decision is expected soon from the district judge regarding whether he will leave the stay in place throughout the appeal.