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Inside Washington (09/09/2011)

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* WASHINGTON (9/12/11)--Elizabeth Warren, who organized the Consumer Financial Protection Bureau (CFPB) for the Obama administration and is now exploring a run for the U.S. Senate, is asking supporters to sign a petition that calls for the confirmation of the CFPB’s first director. President Barack Obama has nominated former Ohio Attorney General Richard Cordray to lead the bureau (American Banker Sept. 9). The petition appears on Warren’s website and is linked with her Facebook page. The website and Facebook page include the message, “Call on the Republicans on the Senate Banking Committee to protect the interests of middle class families, to confirm a director for the CFPB, and to let the agency do its work.” Republicans have threatened to block the confirmation of any director unless changes to CFPB’s structure are made … * WASHINGTON (9/12/11)--President Barack Obama’s American Jobs Act speech Thursday included two proposals that could influence the financial services industry. First, the legislation will include a national infrastructure bank (American Banker Sept. 9). Though Obama called for a national infrastructure bank, the idea has not been supported by Republicans in Congress. Banks oppose the idea, arguing that it would either subsidize projects that would otherwise be financed with private funds, or pay for economically unsound projects. Obama also vowed to take steps that would allow more Americans to refinance their mortgages. Although the speech included no specifics about the refinancing plan, Obama said it “could put more than $2,000 a year in a family’s pocket” … * WASHINGTON (9/12/11)--Freddie Mac said in a letter to investors it will not significantly discount its backlog of foreclosed homes in a letter to investors. Although steep discounts could help the government-sponsored enterprise relieve its backlog of foreclosed homes, they could also damage the housing market (American Banker Sept. 9). “We are extremely mindful of the impact in our approaches to pricing and how it affects the values of neighborhoods should a discounted sale occur,” Freddie stated in a letter sent to investors who are interested in acquiring properties in bulk through its real-estate owned sales unit HomeSteps. Freddie said it is selling above 90% of market value in most of its volume markets …

NCUA OIG Examiners could have eased Certified FCU losses

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ALEXANDRIA, Va. (9/12/11)--National Credit Union Administration (NCUA) examiners “could have prevented or reduced” losses to the National Credit Union Share Insurance Fund that were caused when Certified FCU failed in 2010 if “swift and appropriate administrative remedies” had been taken, the NCUA’s Office of the Inspector General (OIG) has determined. Certified FCU, which was based in Commerce, Calif., was closed due to its declining financial condition in May 2010. The credit union held $37.6 million in assets from 8,850 members when it was liquidated. The credit union’s members and assets were assumed by Vons FCU. An NCUA investigation of Certified’s books found “serious internal control weaknesses, including inadequate segregation of duties and untrained accounting staff.” These weaknesses “allowed the CEO to override internal controls, prepare erroneous account reconciliations from the general ledger to the subsidiary ledgers, and inaccurately report financial results,” resulting in the credit union overstating its financial condition. The credit union, according to the NCUA, also failed to properly book some loan sales, “erroneously recording the offsetting credit to income, rather than reducing loans receivable.” This error resulted in $8.8 million in losses for the credit union. The OIG said that the NCUA examiners’ and Region V management’s “failure to take decisive action” permitted the credit union’s CEO “to breach his fiduciary duty and remain in his position until he resigned in May 2010.” The NCUA said it is implementing a National Supervision Policy Manual and has improved some review processes to deal with these issues in the future. The agency also noted it has expanded its examiner procedures to “require examiners ensure amounts reported on the general ledger for all material accounts such as loans, member deposits, cash, and investments, reconcile to subsidiary ledgers” and the credit union’s call report. For the full OIG report, use the resource link.

CU execs must serve only one board NCUA says

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ALEXANDRIA, Va. (9/12/11)--The National Credit Union Administration’s (NCUA) management official interlocks rule prohibits members of a credit union’s management team from serving other nonaffiliated depository organizations, NCUA Associate General Counsel Hattie Ulan said in an agency legal opinion. The opinion responded to a question from Everence FCU President/CEO W. Kent Hartzler. Everence FCU, which is based in Lancaster, Pa., held $124 million in assets from more than 15,000 members as of March. The credit union’s membership is open to “everyone who is interested in practicing Christian stewardship,” according to its website. The institution and related organizations are tied to the Anabaptist Mennonite church. The credit union is tied to Everence Financial, a “variety of companies that provides insurance and financial products,” the NCUA said. The agency in its opinion said it was concerned that Everence FCU’s board “is improperly controlled by Everence Financial, particularly with regard to Everence Financial’s selection of the federal credit union's slate of candidates for its board of directors.” The president and chief executive officer of Everence Financial serve on the credit union’s board of directors, and also serve as board members for Everence’s thrift. According to the agency, the Interlocks Act and NCUA’s rule “generally prohibit an federal credit union's management official from simultaneously serving as a management official of another depository organization that has an office in the same city, town, or village unless the dual service qualifies for an exception or NCUA exempts a prohibited interlock.” This same rule is broadened to a “relevant metropolitan statistical area” if each institution has total assets of $50 million or more, the NCUA added. The Everence directors would be covered under these NCUA rules, as Everence FCU and the associated thrift each have offices in the same jurisdiction. However, Ulan suggested that the directors and their credit union could petition for an exemption with the agency. For the full opinion, use the resource link.

Agency reminds CUs TCCUSF payments due Sept. 27

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ALEXANDRIA, Va. (9/12/11)--The National Credit Union Administration (NCUA) late last week reminded credit unions that payments for their 2011 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) Assessments, as well as a semi-annual National Credit Union Share Insurance Fund (NCUSIF) 1% capitalization deposit adjustment, must be made by Sept. 27. The agency late last month assessed a 25 basis point (bp) TCCUSF premium for 2011, and that premium is expected to bring in $1.96 billion in funds to help cover the costs of corporate credit union stabilization. The NCUA said credit unions should expense the assessment in September and report the full expense on their Sept. 30 call reports. The agency during that meeting also said there is "no anticipated need" for an NCUSIF premium to be charged in 2011, and an NCUSIF premium "will not be necessary in 2012" if the number of credit union failures maintains its current pace. Payments may be made through the mail or via an electronic payment portal, Electronic payments will be automatically collected on Sept. 27. The agency added that credit unions that are overcapitalized will receive their refunds on Sept. 23. For the NCUA release, use the resource link.