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Hearing on underserved sparks FOM request from NCUA

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WASHINGTON (9/23/11)--Easing some credit union membership criteria and increasing funding to the Community Development Revolving Loan Fund (CDRLF) are two ways that Congress can help credit unions increase their work in unbanked and underbanked communities, National Credit Union Administration Executive Director David Marquis testified on Thursday before the House Financial Services subcommittee on financial institutions and consumer credit. Thursday’s hearing focused on the availability of credit products for consumers who may not have access to services provided by traditional financial institutions. Marquis in prepared testimony cited NCUA research that estimates there are 9 million unbanked and 21 million underbanked U.S. households, totaling 60 million unbanked or underbanked adults. A key goal of credit unions is serving these populations, and Marquis emphasized that credit unions are not in the financial services business to make a profit. Marquis specifically recommended that Congress allow credit unions to help these unbanked and underbanked households by allowing single common-bond credit unions and community-chartered credit unions to add underserved areas to their respective fields of membership. Doing so, Marquis said, would open up credit union access to many more potential members and could allow more credit unions to participate in CDRLF-related programs, “thus increasing the availability of credit and savings options in the distressed areas where credit unions operate.” The NCUA official also called on Congress to increase resources for the CDRLF, which would allow that fund to provide more technical assistance grants and loans to low-income credit unions (LICUs). The demand for these grants and loans often exceeds available funding, and increased funding could be provided through potential public-private partnerships or other private-sector support, “rather than providing funding through traditional means like increased appropriations,” Marquis suggested. Marquis added that the agency is working on its own to increase access to financial services through financial literacy initiatives and is promoting awareness of the LICU designation among credit unions. The NCUA is also providing assistance to credit unions that are seeking a LICU designation, he said. During his testimony, Marquis also took the opportunity to tout the benefits of lifting the credit union member business lending cap and promote H.R. 1418, the Small Business Lending Enhancement Act. This bill, Marquis said, “features appropriate safeguards to ensure responsible lending and expand access to credit” and would “prudently allow credit unions to diversify their risks and portfolios.” The Credit Union National Association (CUNA) estimates that lifting the MBL cap to 27.5% of assets would inject more than $13 billion in new funding into the economy, at no cost to taxpayers, creating 140,000 new jobs in the first year after enactment.

NCUA OKs new corporate CU office authorities

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ALEXANDRIA, Va. (9/23/11)—The National Credit Union Administration (NCUA) expanded the authority of its Office of Corporate Credit Unions (OCCU) director by adding seven new items to the list of actions that its director may approve or disapprove. The new authority is tied to the agency’s corporate credit union rule changes that were made in September 2010. Specifically, the changes relate to prompt corrective action notices and a corporates treatment of capital. Under the new rule, approved unanimously by the board during Thursday’s open board meeting, the OCCU director will be allowed to approve or disapprove a given corporate credit union’s retained earnings accumulation plan and whether a corporate credit union may release non-perpetual capital accounts (NCAs) to facilitate the payout of shares in a liquidation. The OCCU director will also have the ability to approve or disapprove a corporate’s establishment of individual minimum capital requirements and any actions it wishes to take regarding capital restoration plans. According to the NCUA, the director will also have authority over:
* Whether a corporate credit union may redeem NCAs before they reach maturity or before the end of the notice period; * Whether a corporate credit union may release perpetual contributed capital (PCC) instruments to facilitate the payout of shares in a liquidation; and * Whether a corporate credit union may call PCC instruments.
The NCUA said these changes would “enhance the effectiveness” of its corporate credit union rule, increase the timeliness of OCCU responses, and reduce the regulatory burden for credit unions. For more on the NCUA meeting, use the resource link.

Equity ratio net worth changes passed by NCUA

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ALEXANDRIA, Va. (9/23/11)--Amendments to the Federal Credit Union Act’s definitions of the National Credit Union Share Insurance Fund’s (NCUSIF) definitions of equity ratio and credit union net worth were unanimously approved by the National Credit Union Administration (NCUA) board on Thursday. The Credit Union National Association (CUNA) following the meeting said it strongly opposes an provision that requires credit unions to deduct the amount of any bargain purchase gain from the net worth of a target credit union before a merger, adding following the meeting that this change “could result in a lower post-merger net worth, potentially discouraging mergers.” NCUA Chairman Debbie Matz during the meeting said the agency did not intend for these changes to discourage mergers or to negatively impact credit unions that have merged. The bargain purchase gain changes will not apply to mergers that have already begun or already have been approved. The changes are set to become effective thirty days after the final rule is published in the Federal Register. However, agency staff hinted that the effective date may be pushed closer to the end of 2011, as some changes to call reports cannot be made within thirty days. The equity ratio changes clarify that the NCUSIF’s equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions. Under the changes, section 208 assistance provided to troubled credit unions will soon qualify as regulatory net worth for natural-person credit unions under NCUA's Prompt Corrective Action authority. Board Member Gigi Hyland asked whether a line detailing any section 208 assistance could be added to a credit union’s call report, but NCUA staff said such a line should not be added. The NCUA’s Office of General Counsel was concerned that adding that extra detail could negatively impact credit unions that receive section 208 assistance, NCUA staff explained. For more on the NCUA meeting, use the resource link and see today’s NewsNow coverage.

2010 HMDA data now available from FFIEC

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WASHINGTON (9/23/11)--Data on the mortgage applications, originations, purchases, and denials that were filed by credit unions and other Home Mortgage Disclosure Act (HMDA) -covered financial institutions in 2010 are now available, the Federal Financial Institutions Examination Council reported on Thursday. The mortgage data covers transactions at 7,923 financial institutions. The data includes disclosure statements, aggregate data for metropolitan statistical areas, nationwide summary statistics of lending patterns, and Loan/Application Registers, the FFIEC said in a release. This data covers 12.9 million mortgage applications, 3.2 million mortgage purchases, and 165,000 denied preapproval requests. The data is further broken down by loan type, loan purpose, loan amount, property type, property location, applicant background, and census tract characteristics. The FFIEC noted that the data shows “a continued heavy reliance on loans backed by Federal Housing Agency insurance,” a trend “that began with the emergence of the recent mortgage market difficulties.” The FHA’s total share of first-lien loans fell slightly to 36% in 2010, below 2009’s total of 37%, but well above the 7% total reported in 2007. For more on the FFIEC report, use the resource link. The FFIEC is comprised of the leaders of the National Credit Union Administration (NCUA), the Federal Reserve Board, the office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corp. (FDIC), and the newest member, the Consumer Financial Protection Bureau. NCUA Chairman Debbie Matz succeeded FDIC Chairman Sheila Bair as head of the FFIEC on March 4. She is serving a two-year term.

NCUSIF reserves being appropriately lowered NCUA

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ALEXANDRIA, Va. (9/23/11)--The National Credit Union Share Insurance Fund’s equity ratio stood at 1.31% as of August, and National Credit Union Administration (NCUA) Chairman Debbie Matz during Thursday’s open board meeting requested that her staff provide the board with their “best possible estimate” of the year-end ratio of the NCUSIF at the upcoming November board meeting.
Click to view larger image NCUA board member Michael Fryzel Far right)views this month's NCUSIF/TCCUSF report during Thursday's open board meeting. (CUNA Photo)
NCUA Chief Financial Officer Mary Ann Woodson said the current year-end equity ratio estimate is between 1.28% and 1.32%. Woodson during her presentation of monthly insurance fund statistics told Board Member Gigi Hyland that if the equity ratio is above its 1.3% normal operating level at the end of the year, any excess funds would be transferred to the Temporary Corporate Credit Union Stabilization Fund. NCUSIF reserves totaled $1 billion, and Hyland noted that this reserve level is being lowered “appropriately.” CAMEL Code credit unions were also covered during the report, and Woodson noted that the total number of CAMEL 3, 4 and 5 credit unions fell between July and August. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent approximately 18% of total insured shares, with those shares totaling $162 billion in funds. Hyland remarked it was good to see the number of CAMEL rated credit unions dropping bit by bit, and Matz said, in general, that it was good to hear “some good news.” For more on the NCUA meeting, see related NewsNow coverage and use the resource link.

Inside Washington (09/22/2011)

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SBA website
* WASHINGTON (9/23/11)--The question of whether too big to fail still exists was up for debate this week, a little more than a year after the enactment of the Dodd Frank Wall Street Reform and Consumer Protection Act was enacted (American Banker Sept. 22). Moodys Investor Services provided a strong case Wednesday for those who argue the era of bailouts is over by downgrading the long-term rating of Bank of America Corp. and Wells Fargo & Co., and the short-term rating of Citigroup Inc. In making the downgrades Moodys cited the probability that regulators would let banks fail. U.S. Rep. Barney Frank (D-Mass.), whose namesake bill comes under constant attack for both going too far and not going far enough, had this to say about the downgrade: "I can't comment on the absolute value of Moodys ratings, but I am pleased that the rating agency recognizes that such large institutions are not too big to fail." On Tuesday at a public hearing on the pending merger of Capital One and ING Direct USA, the Independent Community Bankers of America argued regulators should block any merger that would create a firm with more than $100 billion of assets because the government were not have the ability to unwind such a large firm. The too big to fail issue also was debated during American Bankers Regulatory Symposium this week. Tom Hoenig, the president of the Federal Reserve Bank of Kansas City, said the interconnectedness that exists between large institutions and the financial system will cause any Treasury secretary to ultimately bail out troubled large firms during a financial crisis. Rodgin Cohen, a partner with the law firm Sullivan and Cromwell, said new resolution powers for the Federal Deposit Insurance Corp. and higher capital and liquidity standards have eliminated too big to fail

* WASHINGTON (9/23/11)--Phae Howard, executive director of the National Center for the Prevention of Home Improvement Fraud, and Michael Mitravich of the Small Business Associations (SBA) Office of Disaster Assistance will host the SBAs September web chat on Disaster Recovery for Business Owners: An Inside View at 1 p.m. (ET) Thursday. This months web chat will focus on what homeowners and businesses need to know after a disaster. Howard and Mitravich will answer questions for one hour. Web chat participants can post questions online in advance and join the live web chat through the WASHINGTON (9/23/11)--The Obama administration Thursday announced the winners of the $37 million Jobs and Innovation Accelerator Challenge, a multi-agency competition that supports the advancement of 20 high-growth, regional industry clusters. Investments from three federal agencies and technical assistance from 13 additional agencies will promote development in areas such as advanced manufacturing, information technology, aerospace and clean technology, in rural and urban regions in 21 states. Projects are driven by local communities that identify the economic strengths of their areas, with funding awarded to the best proposals. The public-private partnerships are expected to create more than 4,800 jobs and 300 new businesses and retain another 2,400 jobs and train about 4,000 workers for careers in high-growth industries, according to estimates by grantees. Each of the 20 awards average about $1.8 million per project, and winning clusters will contribute another $13 million in total matching funds. ...