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NCUA schedules a post-corporate CU rule town hall meeting

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ALEXANDRIA, Va. (9/22/10)--The National Credit Union Administration (NCUA), scheduled to consider a new corporate credit union regulatory regime on Friday, will quickly follow up its action with an informational session for credit unions on Monday. NCUA Chairman Debbie Matz announced Tuesday that the agency will host a free, town hall-style webinar Monday, Sept. 27 from 3 -5 p.m. (EST) featuring detailed discussion of NCUA’s initiatives to strengthen the corporate credit union system. “This new corporate rule is so important, we want to use every venue to reach a many stakeholders as possible,” Matz said in a release. “We want to explain the rule and answer questions so credit union leaders understand the new landscape and what it means for them.” The session will also provide an update on the NCUA’s plan to resolve corporate legacy assets. (See related story: Special NCUA meeting goes beyond corporate CU rule.) Participants may submit questions in advance of the live session. Registration is currently open. Use the resource link below.

On day No. 2 CFPB adviser Warren meets with CUNA

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WASHINGTON (9/22/10)--On her second day since joining the Obama administration as Assistant to the President and Special Advisor to U.S. Treasury Secretary Tim Geithner, Elizabeth Warren met with Credit Union National Association (CUNA) President/CEO Bill Cheney for further perspective on top credit union issues. Warren is charged with helping the administration create the new Consumer Financial Protection Bureau (CFPB). The CFPB, which was created when the Dodd-Frank financial regulatory reform package was passed earlier this year, will monitor financial markets for evidence of systemic risk and work to consolidate and streamline consumer protection rules.
CUNA President/CEO Bill Cheney (left) meets with Elizabeth Warren (center) in the U.S. Treasury's offices. Also pictured: CUNA General Counsel Eric Richard and Deputy General Councel Mary Dunn. (CUNA photo)
Cheney emphasized that CUNA's key objective in working with the new agency will be to minimize credit unions' regulatory burdens, costs and requirements. Warren welcomed CUNA's commentary on how consumer financial regulations can be improved and how consumer financial disclosures can be pared down. Warren also noted that improving the transparency and consumer-friendliness of many financial products would benefit credit unions, as they already lead their competitors in these core areas. Cheney reiterated CUNA’s desire to work with Warren and the CFPB going forward, and urged Warren to include credit union leaders as part of the CFPB’s developing Consumer Advisory Board. Cheney also attended a Treasury mortgage disclosure forum later in the day. The forum was convened by the Treasury to discuss how mortgage disclosure forms can be simplified "so that consumers have the clear and easy-to-understand information they need to make the financial choices that are best for themselves and their families." The CFPB earlier this week announced that the National Credit Union Administration and other financial regulators will be required to transfer functions and authorities regarding consumer financial laws to the CFPB by July 21, 2011.

Multi-featured open-end lending guidance posted

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ALEXANDRIA, Va. (9/22/10)--The National Credit Union Administration (NCUA) on Tuesday released letter to credit unions No. 10-FCU-02, which includes best practices related to multi-featured open-end lending (MFOEL). Last year, the Federal Reserve Board (Fed) issued comprehensive changes to the open-end lending rules under Regulation Z, which became effective as of July 1. Some of these changes affected MFOEL programs. Specifically, the Fed indicated that closed-end loan disclosures must be provided for closed-end loans, which could apply to loans offered under MFOEL programs. However, the Fed indicated that closed-end disclosures under these open-end MFOEL programs will not be necessary if credit under the program "as a whole" can be replenished, even if certain subaccounts are not replenished. Although underwriting individual advances will be prohibited, creditors will still have the right to periodically verify credit information and to adjust the credit limit and terms if the borrower’s creditworthiness has deteriorated. Although these changes will still allow credit unions to offer MFOEL programs, operational changes were still necessary. The letter now issued by NCUA is intended to provide additional guidance in complying with these new Regulation Z rules, including guidance as to the level of verification that should be undertaken with regard to these programs. The letter also identifies numerous best practices for credit unions that offer MFOEL accounts, which the NCUA defined as “single accounts with separate sub-accounts for different loan products.” These practices address the differences between verification and underwriting, as well as a number of other issues. One of the best practices that NCUA recommended for credit unions is using “closed-end lending practices and disclosures when it is appropriate to perform underwriting at the time of application.” The NCUA also said that credit reports should be used to verify continued creditworthiness, not to re-underwrite loans. As for the other issues, credit union staff should have the training needed to deal with MFOEL accounts, and credit unions should consider undertaking a review of their policies, procedures, and documents for Regulation Z compliance. Credit unions should also ensure that their data processor is equipped to handle MFOEL loans. A credit union should also maintain separate sets of policies and procedures for both open-end and closed-end lending policies. For the full NCUA letter, use the resource link.

New NCUA regime goes beyond corporate CUs

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ALEXANDRIA, Va. (9/22/10)--There will be much to absorb after this Friday's special open National Credit Union Administration meeting scheduled to take up new regulation for corporate credit unions, as well as present an update on the agency's corporate credit union legacy asset plan. Other items on the agenda of the Sept. 24 meeting are delegation of authority regarding corporate credit union service organizations, and an interpretive ruling and policy statement on corporate FCU chartering guidelines. A 10:00 a.m. ET closed NCUA board meeting will precede the 2:30 p.m. ET open meeting. The NCUA early last year placed the two largest corporate credit unions, U.S. Central Federal Credit Union and Western Corporate Federal Credit Union, into conservatorship “to stabilize the corporate credit union system and resolve balance sheet issues” after those and other corporate credit unions realized billions in investment-related losses. The majority of the troubled legacy assets, which are held by U.S. Central and WesCorp, as well as other corporate credit unions, are private label mortgage-backed securities. CUNA Chief Economist Bill Hampel has estimated that the combined loss portfolios of U.S. Central and WesCorp could total between $9 billion and $11 billion. The NCUA, as it develops its soon-to-be-released plan, is attempting to deal with as much as $50 billion in long-term assets. The Credit Union National Association (CUNA) addressed the corporate credit union situation ahead of NCUA’s upcoming meeting, calling for a sharply revised corporate business model, with smaller balance sheets and greater focus on payments-related rather than investment services. The corporate credit union network can evolve to be the best provider of financial services to credit unions only if it makes the "deep and far-reaching changes" needed to do so, according to CUNA. CUNA has also repeatedly encouraged the NCUA to develop a legacy asset plan that addresses the legacy asset problem at the lowest cost to credit unions while also allowing capital holders to benefit if confirmed losses are sufficiently below previous estimates.

Inside Washington (09/21/2010)

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* WASHINGTON (9/22/10)--On July 21, federal banking regulators will no longer have the power to write consumer protection rules, said American Banker (Sept. 21). The transfer date, which was announced Monday, means that the powers will move from the regulators to a new Consumer Financial Protection Bureau created under the Dodd-Frank Act. The bureau will have rule-writing authority for the Truth in Lending Act, Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act and the Home Ownership and Equity Protection Act. Elizabeth Warren has been tapped to serve as an assistant to President Barack Obama and special assistant to Treasury Secretary Timothy Geithner to create the bureau ... * WASHINGTON (9/22/10)--Republicans will reopen the Wall Street reform law and overhaul a newly created consumer protection bureau if they regain control of Congress after the November elections, said Sen. Richard Shelby (R-Ala.) on Monday (Reuters Sept. 21). The reform bill is “sweeping” and it’s “incumbent upon us to revisit it,” he said. The bill will place new restrictions on Wall Street. Lawmakers have already tried to change the bill, which was signed in July. Shelby said the proposed consumer agency bothers him the most. He said he doesn’t think the agency will be good for business or the financial sector. Sheila Bair, chairman of the Federal Deposit Insurance Corp. (FDIC), said banks already face enough regulatory scrutiny, and she warned against revisiting the law ...