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Bernanke names next steps as Fed adapts to CFPB changes

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WASHINGTON (10/1/10)—Federal Reserve Chairman Ben Bernanke this week said that the Fed is moving forward with its implementation of the recently enacted Dodd-Frank Financial Reform legislation, adding that the Fed has identified 250 implementation-related projects to take up. Bernanke made the remarks during a Senate Banking Committee hearing on the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Bernanke said that the Fed is “drawing on expertise and resources” from Fed-based experts in banking supervision, economic research, financial markets, consumer protection, payments, and legal analysis to ensure that the Fed meets its obligations “in a timely manner.” One such obligation is the establishment of the new Office of Financial Research and an associated oversight council, and the Fed is working closely with the U.S. Treasury as it develops this office. The Fed is also moving to transfer a number of its consumer proterction responsibilities to the to-be-established Consumer Financial Protection Bureau (CFPB). The Fed will also need to act quickly to meet a Dec. 1 deadline for information on some individual transactions that were made under various liquidity programs. According to Bernanke, the Fed will “provide detailed information,” including the “names of counterparties, the date and dollar value of individual transactions, the terms of repayment, and other relevant information.” U.S. Treasury Deputy Secretary Neal Wolin, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation Chairman Sheila Bair, and U.S. Securities and Exchange Commission Chairman Mary Schapiro were also among those who testified.

Compliance Challenge Watch for these NCUA examiner red flags

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WASHINGTON (10/1/10)--With National Credit Union Administration (NCUA) Chairman Debbie Matz earlier this month saying that the NCUA would likely redesign some aspects of its examination process to better interact with the Consumer Financial Protection Bureau (CFPB), credit unions should be sure that they are up to date on NCUA examination practices. In an example given in this month’s Compliance Challenge, NCUA examiners are reviewing a credit union’s indirect lending program. According to the Compliance Challenge, high instances of first payment default, payment deferment, and account reaging, as well as weak loan documentation, would draw attention from examiners. Poorly executed dealer management programs and insufficient analysis of indirect loan portfolio performance are other “red flags” that would surely be noted by NCUA examiners. The NCUA’s recently released letter to credit unions No. 10-CU-15 covers due diligence for indirect lending programs, as well as some other steps that credit unions should take during the planning process. The letter also addresses what should be covered in vendor contracts and written agreements, what steps are necessary to detect and prevent fraud, and how to develop the processes needed to institute and manage indirect lending programs. For the Compliance Challenge and the NCUA’s letter to credit unions, use the resource links.

Treasury announces new 312 million round of CDCI funds

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WASHINGTON (10/1/10)--The number of community development credit unions (CDCUs) receiving funds from the U.S. Treasury’s Community Development Capital Initiative (CDCI) rose to 48 on Thursday, as the Treasury revealed the latest round of CDCI Fund recipients. The 48 credit unions, which represent 21 U.S. states and Guam, have received nearly $70M in CDCI funds since the fund was created earlier this year. Up to $100 million in funds have been made available to credit unions, and 111 CDCUs applied for the funds. The CDCI makes secondary capital investments of up to 3.5% of assets in eligible low-income credit unions. A total of $312 million in funds were awarded to eligible financial institutions during this round of the CDCI. Overall, that program has invested $570 million in 84 Community Development Financial Institutions (CDFIs) in 26 states, the District of Columbia, and Guam. The Treasury defines CDFIs as “institutions that target at least 60% of their lending and other economic development activities in areas underserved by traditional financial institutions.” The Treasury’s CDCI investments are made at a dividend rate of 2%. That rate increases to 9% after eight years, the Treasury said. See related story "Capital funds a 'milestone' for CDCUs, says federation" with response from the National Federation of Community Development Credit Unions, in News Now's System section. For the Treasury release, use the resource link.

Hudson Miracle pilot Matalin-Huffington debate highlight CUNAs 2011 GAC

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WASHINGTON (10/1/10)-- A genuine American hero and a face-off between two of the nation’s best known female political pundits headline the Credit Union National Association’s 2011 Governmental Affairs Conference, Feb. 27 through March 3 at the Washington Convention Center. Registration and housing lines are now open (use the resource links below).
The GAC will feature remarks from Captain Chesley B. “Sully” Sullenberger III, the heroic pilot who on Jan. 15, 2009 masterfully landed U.S. Airways Flight 1549 on New York’s Hudson River and saved the lives of 155 people. Sullenberger’s daring landing captivated the nation and has been dubbed the “Miracle on the Hudson.” Sullenberger later wrote the New York Times bestseller “Highest Duty: My Search for What Really Matters” and was named one of the 2009 world’s 100 most influential people by Time magazine. Another 2011 GAC highlight will be a political point-counterpoint between Mary Matalin and Arianna Huffington. Matalin is a celebrated conservative voice, CNN commentator, and former assistant to President George W. Bush and Vice President Dick Cheney. She and her husband, Democratic strategist James Carville, are one of Washington's best-known political couples. Huffington is the liberal commentator who co-founded The Huffington Post blog and news site that has become one of the most widely read and frequently cited media brands on the Internet. The Huffington Post also was the launch pad for the “Move Your Money” campaign that has urged consumers to move their accounts from big banks to credit unions and community banks. Matalin and Huffington are accustomed to sparring with one another over political issues; the two recently began a radio show together, "Both Sides Now," as a forum to debate politics and current events. CUNA’s GAC is the credit union movement’s premier political conference, each year giving credit union executives and board members an opportunity to hear influential leaders from Congress, the administration and the federal regulatory agencies. The afternoon of Wednesday, March 2, and the morning of Thursday, March 3, will be devoted to Capitol Hill visits, when attendees meet face-to-face with their members of Congress and staff to discuss issues of concern to the credit union movement. The 2011 GAC conference theme is, "Visionary: Creating the Credit Union Future." "The new Congress that gavels into session in 2011 will be dramatically different than its predecessor,” noted Bill Cheney, who will be presiding over his first GAC as CUNA’s president/CEO. “More than ever, we must educate legislators, demonstrate our grassroots strength, and make a powerful impact. The GAC presents an early opportunity to do precisely that and set a compelling vision for political success.” The conference also offers a wide array of educational “breakout” sessions, the credit union industry’s largest exhibitor showcase, guest programs to tour Washington’s sights, and a number of entertaining events such as the Gala Reception and Dance on the evening of Wednesday, March 2, where attendees can network and socialize with colleagues from around the country. The conference will begin the evening of Sunday, Feb. 27, with an opening reception in the Grand Exhibit Hall. Additional speakers and session topics will be announced in the weeks to come. For more information and to register, use the resource link below or go to www.cuna.org.

New CRA bill as expected excludes CUs

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WASHINGTON (10/1/10)--Legislation that would strengthen the Community Reinvestment Act (CRA) examination process “to decrease the current problem of grade inflation” was introduced by Rep. Luis Gutierrez (D-Ill.) on Wednesday. As noted earlier this month by House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) speaking to a Massachusetts league meeting in Washington, D.C., the CRA legislation will not impose CRA requirements on credit unions. The legislation (H.R. 6334), known as the American Community Investment Reform Act of 2010 (ACIRA), would “expand the CRA beyond banks to the institutions that provide financial products in the modern financial services marketplace,” according to a release. The legislation would introduce an "outstanding" rating for financial institutions that show a “genuine and extraordinary commitment to their community” and would seek to “encourage safe and responsible lending” via the creation of a Community Development test. Current CRA requirements provide tests for lending, investment and service. The CRA rating and review processes would be “more open to public review and comment,” the release added. Gutierrez in a statement said that “it was the failure to include more of the financial services industry under the standards of CRA” that contributed to the financial crisis. “Had mortgage brokers, the subsidiaries of bank holding companies, and those that helped to finance so many of these toxic, predatory mortgages been held to the standards of the CRA, we might have avoided this crisis. That's one of the main goals of this bill." The bill is currently cosponsored by Reps. Maxine Waters (D-Calif.), Eddie Bernice Johnson (D-Texas), and Rep. Al Green (D-Texas).

Fannie Freddie loan limits get temporary extension

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WASHINGTON (10/1/10)—Both chambers of the U.S. Congress voted late Wednesday in favor of a bill that would temporarily extend higher loan limits for loans backed by the Federal Housing Administration, Freddie Mac, and Fannie Mae. In effect, the votes extend increased loan limits through Sept. 30, 2011. The current maximum loan limits of $729,750 in high-cost regions would revert back to $625,000 at the end of this year without the extender. The provision was included in a broad continuing resolution that would fund the government through Dec. 3. It has been widely reported that lawmakers want to have time to campaign before a contentious and perhaps pivotal November election and intend to turn their attention back to the federal budget after the elections.

Inside Washington (09/30/2010)

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* WASHINGTON (10/1/10)—Janet L. Yellin has been confirmed by the U.S. Senate as vice chairwoman of the Federal Reserve Board and Sarah Bloom Raskin has been confirmed as a Fed governor (The New York Times Sept. 30) The Fed’s seven-member board has been operating with just four members since Donald L. Kohn retired as vice chairman on Sept. 1. There is one place still left vacant, and Peter A. Diamond, an MIT economics professor, has been nominated by President Obama to fill that spot … * WASHINGTON (10/1/10)—November is the new ETA for legislation that would outline the future of the country’s housing finance system, according to House Financial Services Committee Chairman Barney Frank, who said Wednesday that a shorter—by seven days—than expected legislative calendar prior to the pre-election recess would make it too much of a rush job to tackle such legislation before then (American Banker Sept. 30) Frank made his remarks during a committee hearing on the future of Fannie Mae and Freddie Mac, at which witnesses such as Phil Swagel, a professor at the McDonough School of Business at Georgetown University and a former Bush administration official, and Ed Pinto, formerly the chief credit officer at Fannie Mae and now a consultant, testified. During the hearing one panel member, Rep. Paul Kanjorski (D-Pa.), wondered if the transition of student-loan giant Sallie Mae from a government-sponsored enterprise (GSE) to private ownership could serve as a model for a new structure for housing GSEs, Fannie Mae and Freddie Mac …

NCUA issues prohibition orders (09/29/2010)

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ALEXANDRIA, Va. (9/30/10)—Two former credit union employees have been banned from future work at any federally insured financial institution under prohibition orders issued by the National Credit Union Administration (NCUA). In a Wednesday announcement, the NCUA noted the following details of the enforcement orders:
* Carla Daniels, a former employee of School Systems FCU in Albany, N.Y., was convicted of grand larceny and sentenced to five years' probation; and * John Freundner, a former employee of BMI FCU in Dublin, Ohio, was convicted of theft. Freundner was sentenced to five years' mental health supervision and 60 hours of community service, and ordered to pay $125,025 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

GAO Problems in nonprime loan market slow to disappear

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WASHINGTON (9/30/10)--Recent government analysis of loan performance and default factors associated with nonprime mortgages originated from 2000 through 2007 shows a 27% increase in the numbers of such loans that were seriously delinquent at the end of 2008, compared with 2007. In a Government Accountability Office (GAO) report titled “NONPRIME MORTGAGES: Analysis of Loan Performance, Factors Associated with Defaults, and Data Sources,” the government noted as background that “the surge in mortgage foreclosures that began in late 2006 and continues today was initially driven by deterioration in the performance of nonprime (subprime and Alt-A) loans.” Those loans, the analysis said, increased dramatically from 2000 through 2006, jumping from about $125 billion--or 12% of all mortgage originations--to about $1 trillion, or 34% of originations. “The number of nonprime loans that were 90 or more days late grew throughout 2009, accounting for most of the overall growth in the number of serious delinquencies. By comparison, the number of active loans in the foreclosure process grew in the first half of the year, and then began to decline somewhat. Additionally, 475,000 nonprime mortgages completed the foreclosure process during 2009. “The persistently weak performance of nonprime loans suggests that problems in the nonprime market will not be resolved quickly, and underscores the importance of federal efforts to assist distressed borrowers and prevent a recurrence of the aggressive lending practices that helped precipitate the foreclosure crisis,” the GAO report said. For more, use the resource link to access the report.

CUNA on YouTube CUs alone pay for corporate CU plan

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WASHINGTON (9/30/10)--Credit Union National Association (CUNA) President/CEO Bill Cheney in a video posted on YouTube urges consumers to get the full story on the National Credit Union Administration’s (NCUA) corporate credit union actions and not be misled by headlines that call those actions “a bailout.” “Credit unions are paying for the cost of the corporate stabilization, every single penny will be paid by credit unions,” Cheney emphasizes. The CUNA CEO urged people to read past the headlines and go to the meat of the articles. The stories in such publications as The Wall Street Journal, The New York Times, MarketWatch, Reuters, and CNN Money.com got it right -- that "taxpayers are not paying for this stabilization; credit unions are paying for it.” The NCUA’s corporate credit union and legacy asset plans were released during a closed meeting last Friday. Cheney assured credit union members that the consumer credit unions used by members every day “have not been affected" by the NCUA actions. “Credit unions, because they are conservatively managed and have come through this crisis stronger than other financial institutions, will still pay the highest rates on savings; they’ll charge the lowest rates on loans, and they’ll have the lowest fees. CUs are still the best deal for American consumers."

NCUA addresses Can I buy my college kid an apartment

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ALEXANDRIA, Va. (9/30/10)--Can a credit union member get a long-term mortgage loan to purchase a second residence for a family member to live in while attending college, a New Orleans federal credit union recently inquired of the National Credit Union Administration (NCUA). With housing in many colleges and universities not guaranteed after a college student’s sophomore year, a growing number of parents are seeking to fill the college housing gap by purchasing digs for their son or daughter. So this question may be on the rise at credit unions. In its query, Shell New Orleans FCU stated that the borrower’s family member would be the primary resident of the dwelling while studying and may share the residence with a roommate paying rent for space in the house. NCUA Associate General Counsel Hattie Ulan, in the agency’s reply said that the credit union can make this loan under the long-term mortgage lending authority--but only if the house is intended to be the future principal residence of the member. So if the parents want to retire eventually to College Town, USA, then the credit union can write the loan up to the NCUA's 40-year maturity limit. Ulan wrote that the credit union must determine if the “principal residence” requirement has been met when the loan is made. In what effectively was a clarification of the agency’s mortgage rules, the NCUA also stated that if the “future residency” requirement is met, it would not then matter if the temporary college-aged occupant was a member of the credit union making the loan. Also, the dwelling in question would “still qualify as a future principal residence if space in the home is rented out” until the parents move in. If the loan for the student's lodging will not be the borrower's future residence, the credit union could make a loan subject to NCUA's general lending rules, including the 15-year maturity limit. For the full NCUA letter, use the resource link.

Inside Washington (09/29/2010)

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* WASHINGTON (9/30/10)--Sen. Olympia Snowe (R-Maine), Ranking Member of the Senate Committee on Small Business and Entrepreneurship, wrote to Treasury Secretary Timothy Geithner, Senate Banking Committee Chairman Chris Dodd (D-Conn.) and Ranking Member Richard Shelby (R-Ala.) urging them to provide strict oversight of the new $30 billion Small Business Lending Fund, which was included in the Small Business Jobs and Credit Act of 2010 signed into law Monday by President Obama. In a letter to lawmakers, Snowe said the fund is meant to help community banks give credit to small businesses. She raised concerns about the program’s cost and how it would be structured. “I am asking the Senate Banking Committee to hold regular oversight hearings regarding the new lending facility, paying particular attention to the fund’s cost, unintended consequences, and overall effectiveness,” she said. Credit Union National Association Chairman Harriet May attended the signing ceremony for the Small Business Jobs and Credit Act. May on Monday thanked President Obama on behalf of credit unions for expanding Small Business Administration (SBA) loan limits, a move that will allow credit unions to increase their work with small business-owning members (News Now Sept. 28). Erie (Pa.) FCU's Sandi Carangi also attended the signing ceremony on behalf of her credit union ...

NCUA reveals CEOs for conserved corporate CUs

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ALEXANDRIA, Va. (9/29/10)--The new leaders of recently conserved Southwest Corporate FCU, Members United Corporate FCU and Constitution Corporate FCU were revealed by the National Credit Union Administration (NCUA) on Tuesday. The NCUA has tapped former Genisys CU President/CEO Dianne Addington to manage the operations of Southwest. Addington has a total of 37 years of credit union experience, and spent 22 years with Genisys. Charles Furbee will take temporary control of Members United. While the NCUA’s release did not indicate that Furbee had any prior credit union industry experience, Furbee has served 27 years with the Federal Reserve. The NCUA has elected to pursue a purchase and assumption action or a merger for Wallingford, Conn.’s Constitution Corporate. William White, who previously served as vice president of Constitution Corporate, will take on the role of CEO for the time being. The corporate credit unions were taken into conservatorship on Friday, in a move that gave the NCUA control over 98% of the legacy assets held by all corporate credit unions. The NCUA's plan for these legacy assets, which are made up primarily of private label, residential mortgage-backed securities, is to isolate and fund $50 billion of the assets. The assets will then be reissued as NCUA Guaranteed Notes (NGN), which will then be sold on the open market. (See related stories: NCUA acts on Corp. CUs, legacy assets, NCUA reveals new corporate CU rule (9/27/10). For the NCUA release, use the resource link.

Inside Washington (09/28/2010)

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* WASHINGTON (9/29/10)--Minnesota credit union representatives recently met with lawmakers and industry officials during Minnesota’s annual Hike the Hill on Sept. 21-23 in Washington, D.C., said the Minnesota Credit Union Network (MnCUN). Attendees discussed regulatory and legislative concerns, and interchange with federal officials, National Credit Union Association (NCUA) Chairman Debbie Matz and Board Member Michael Fryzel. Credit union representatives visited the offices of Sens. Al Franken (D-Minn.) and Amy Klobuchar (D-Minn.) and U.S. Reps. Erik Paulsen (R-3rd District), Betty McCollum (D-4th District) and Colin Peterson (D-7th District). They also met with the staff of Reps. Tim Walz (D-1st District), John Kline (R-2nd District), Keith Ellison (D-5th District), Michele Bachmann (R-6th District) and Jim Oberstar (D-8th District). “Hike the Hill provided us with the opportunity to meet with regulators and legislators and discuss solutions to the issues affecting Minnesota credit unions and their members,” said Mara Humphrey, MnCUN vice president of governmental affairs. “This annual trip to the nation’s capital enables us to continue building and strengthening our relationships with lawmakers and federal officials.” Pictured are credit union representatives with Klobuchar (right). (Photo provided by the Minnesota Credit Union Network) ...

Cheney battles notion of CU bailout on Fox News

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WASHINGTON (9/29/10)--Credit Union National Association (CUNA) President/CEO Bill Cheney took to the airwaves to correct the misperception that credit unions are being “bailed out” by the National Credit Union Administration’s (NCUA) recently released corporate credit union and legacy asset plans. Cheney appeared alongside host Gerri Willis, The Wall St. Journal’s Mark Maremont, and analyst Bert Ely on Fox Business Channel’s The Willis Report.
CUNA President/CEO Bill Cheney appeared on Fox Business Channel on Monday to correct credit union 'bailout' claims and discuss the superior rates and service that credit unions offer to both current and potential members.
Cheney said that the notion of a bailout for credit unions was incorrect, noting that credit unions, not taxpayers, are bearing the cost of corporate credit union restructuring. Retail credit unions “will have to bear the cost over a 10 year period, but already have been paying the cost for a year and a half," Cheney added. Maremont backed up this statement. Referencing a prior appearance by Cheney, Willis asked if the $7 billion in savings that consumers could realize thanks to the lower rates and fees charged by credit unions would continue while retail credit unions are repaying the cost of dealing with the corporate situation. Cheney reiterated that credit unions already have been paying the costs and still have delivered the same level of savings to consumers. “As not for profit financial institutions, credit unions don’t have to return dividends to shareholders. The institutions are managed in the best interest of their members. They still pay the highest rates on deposits and the lowest rates on loans.” Cheney added. CUNA has released a comprehensive summary of the NCUA's recent corporate credit union actions and the release of its legacy asset plan. CUNA continues to analyze the impact that these rule changes and the asset plan will have on credit union practices. For the CUNA summary, use the resource link.

CUNA white paper CU alternative capital a top priority

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WASHINGTON (9/29/10)--The Credit Union National Association (CUNA) has developed a comprehensive white paper on capital reform for credit unions, a topic whose importance has only increased by the nation’s recent years of economic upheaval and the current focus on Basel III proposed international capital standards. “Reduced capital ratios at credit unions, strong headwinds against net income, and an interest by policymakers in increased capital at most types of financial institutions all point to the heightened need for alternate capital for credit unions,” the detailed report notes in its introductory paragraphs. It goes on, “Without access to additional forms of capital, many credit unions will be forced to curtail the growth of member service and burden members with higher loan rates and fees and lower dividend rates for years to come.” CUNA's Governmental Affairs Committee this week accepted the report and identified alternative capital as one of credit unions’ top legislative issues in the coming Congress. A credit union’s only source of capital is retained earnings. It is CUNA’s longstanding policy to support the authority of credit unions to build additional capital, either from members or nonmembers, in a way that does not dilute the cooperative ownership and governance structure of credit unions. This additional capital should be subordinated to credit unions’ share insurance funds, so that credit unions have the financial base to offer member services and adjust to fluctuating economic conditions, according to CUNA. Use the resource link to access the white paper recommendations, as well as its evaluations of the current state of credit union capital-to-asset ratios.

FHFA Composite mortgage rate drops in August

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WASHINGTON (9/29/10)—The Federal Housing Finance Agency (FHFA) on Tuesday reported an average national contract mortgage rate of 4.65%. The rate, which is made up of the rates charged for mortgages that were closed during August, is 0.13% lower than the rate recorded in July. The FHFA’s mortgage survey reflects loans that were closed during the last week of August. “The reported rates depict market conditions prevailing in mid- to late-July,” the FHFA added. The FHFA reported an average 3-year mortgage rate of 4.70% and an average 15-year rate of 4.46% during the same month. Both rates decreased significantly from the rates reported in the previous month. The contract rate on the composite of both fixed- and adjustable-rate mortgages was 4.63%, while the effective interest rate was 4.74%. The effective interest rate “reflects the amortization of initial fees and charges,” according to the FHFA. For the full FHFA release, use the resource link.

Legacy asset plan covered in NCUA DVD

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ALEXANDRIA, Va. (9/29/10)—The coming resolution of the corporate credit union legacy asset situation is covered in the most recent National Credit Union Administration (NCUA) corporate video presentation. The video presentation “provides the plan developed to resolve the legacy assets held by the largest corporate credit unions,” the NCUA said. The legacy asset plan "involves isolating the legacy assets to prevent the need to sell them at severely distressed prices; securitizing them and giving them a U.S. government guarantee; and then selling them to investors on the open market," the NCUA said in a release. The video presentation is the fourth and final presentation in the series. Previous video presentations addressed the history and services of the corporates, corporate credit union investments and issues associated with those investments, and the NCUA’s efforts to deal with the problems caused by those investments, respectively. The NCUA said that the four video presentations “were produced to provide credit unions a thorough understanding of the background and prevailing situation concerning the nation’s corporate credit union system.” The NCUA late last week issued a final rule on the corporate credit union system and introduced its comprehensive plan for dealing with the legacy assets held by the corporates. (See related stories: NCUA acts on Corp. CUs, legacy assets, NCUA reveals new corporate CU rule (9/27/10). For the most recent and past NCUA video presentations, use the resource link.

Inside Washington (09/27/2010)

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* WASHINGTON (9/28/10)--The Federal Deposit Insurance Corp. (FDIC) Monday was ready to begin creating a resolution procedure for systemically significant firms that improves the bankruptcy process. The FDIC was scheduled to meet Monday in a first step to implement the resolution plan, which allows the government to improve risky banks and nonbanks (American Banker Sept. 27). The board also is expected to finalize a rule on what conditions securitizers must follow to be exempt from FDIC takeovers. Financial observers said they hope the new plan would mirror the bankruptcy model as closely as possible. Michael Krimminger, FDIC deputy for policy, said while the resolution plan will have some new parts, it will aim to track existing models. The new system also could be more efficient than bankruptcy-related court proceedings, he said ... * WASHINGTON (9/28/10)-- The Federal Deposit Insurance Corp. (FDIC) Monday approved a final safe harbor rule for securitizations and participations. The rule would extend through Dec. 31 a safe harbor protection for treatment by the FDIC as conservator or receiver of financial assets transferred by an insured depository institution for a securitization or participation. The FDIC previously extended the protections twice, with the last set to expire on Thursday. The safe harbor was initially adopted in 2000 for securitizations and participations. In the event of a bank failure, the FDIC would not try to reclaim loans transferred into such transactions as long as an accounting sale had occurred. However, some changes made in June 2009 by the Financial Accounting Standards Board caused many securitizations to now longer comply with preconditions for the application of the original safe harbor ... * WASHINGTON (9/28/10)--The Federal Deposit Insurance Corp. (FDIC) approved the issuance of a proposed rule to implement provisions of the Dodd-Frank Act on regulator reform to provide deposits at all FDIC-insured institutions with unlimited deposit insurance coverage on noninterest bearing transaction accounts from Dec. 31 through Dec. 31, 2012. Under the proposal, the FDIC will create a new, temporary deposit insurance category for noninterest bearing transaction accounts. Under FDIC’s Transaction Account Guarantee Program, which will expire at year-end, the Dodd-Frank provision will apply at all FDIC-insured institutions and will cover only traditional checking accounts that do not pay interest. The rule emphasizes that starting Jan. 1, low-interest consumer checking accounts and Interest on Lawyer Trust Accounts will no longer be eligible for an unlimited guarantee ...

FinCEN proposes internatl transaction reporting plan

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WASHINGTON (9/28/10)—The Financial Crimes Enforcement Network (FinCEN) has proposed rules to require some depository institutions and money services businesses (MSB) to “affirmatively provide records to FinCEN of certain cross-border electronic transmittals of funds (CBETF).” FinCEN Director James Freis said that the proposal, which would require MSBs that conduct CBETF to report international transactions equal to or in excess of $1,000 to FinCEN, would “greatly assist law enforcement in detecting and ferreting out transnational organized crime, multinational drug cartels, terrorist financing, and international tax evasion.” “The proposal will produce valuable data for law enforcement agencies by having first-in and last-out depository institutions (those institutions that are the first to receive funds transferred electronically from outside the United States or the last U.S. institution to transmit funds internationally) to report all such transmittals of funds,” according to a FinCEN release. The FinCEN release estimated that less than 300 depository institutions and 700 MSBs would be subject to the proposed rule. FinCEN said that complying with the reporting requirement will take “little additional effort” from reporting financial institutions. The proposed rule will be open to public comment for 90 days following its publication in the Federal Register.

NCUA holds first post-corporate CU plan town hall

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WASHINGTON (9/28/10)—The National Credit Union Administration (NCUA) on Monday held the first in a series of town hall meetings to explain and gather input on its recently passed corporate credit union and legacy asset plans. The NCUA will hold 11 additional town hall-style meetings in Atlanta, Ga.; Boston, Mass.; Dallas, Texas; Chicago, Ill.; Columbus, Ohio; Detroit, Mich.; Los Angeles, Calif.; Orlando, Fla.; Phoenix, Ariz.; Portland, Ore.; and Alexandria, Va. The first of these meetings will take place in Portland on Oct. 5. NCUA Chairman Debbie Matz said that the NCUA has scheduled at least two meetings in each region “to make sure that credit union officials have an opportunity to be personally briefed and ask questions.” The NCUA last week introduced comprehensive plans addressing both the corporate credit union system and the legacy assets held by many of the corporate credit unions. The NCUA corporate rule strengthens capital requirements on the corporates, establishes concentration limits on investments, revises asset-liability management requirements and alters governance standards. The final corporate rule also amends Part 704 of the NCUA's rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. The new corporate rule will also prohibit the purchase of private-label mortgage-backed securities or subordinated securities. A trio of corporate credit unions were added to the list of corporates under NCUA control, with the NCUA announcing the liquidations of Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU last week. These liquidations, along with the ongoing conservatorships of U.S. Central FCU and Western Corporate FCU, result in the NCUA holding 98% of all distressed legacy assets held in the corporate credit union system. The NCUA’s plan for these legacy assets, which are made up primarily of private label, residential mortgage-backed securities, is to isolate and fund $50 billion of the assets. The assets will then be reissued as NCUA Guaranteed Notes (NGN), which will then be sold on the open market. (See related stories: NCUA acts on Corp. CUs, legacy assets, NCUA reveals new corporate CU rule (9/27/10).

CUs should watch for housing hearings this week

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WASHINGTON (9/28/10)--With Congress scheduled to close until just after November’s midterm elections and little on the legislative calendar, the most pressing events for credit unions during this week will be dual House and Senate hearings on housing finance. The first of these hearings will take place before the House Financial Services Committee on Wednesday morning, with the Senate Banking Committee holding a separate hearing later in the day. The House hearing will cover Federal Housing Administration loan fees and loan oversight, while the Senate hearing will compare various international housing finance systems. The Senate Banking Committee will also discuss the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act with U.S. Treasury Deputy Secretary Neal Wolin, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation Chairman Sheila Bair, and U.S. Securities and Exchange Commission Chairman Mary Schapiro among those scheduled to testify. Votes on standard continuing resolutions, and potential movement on 63 bills that are currently held under suspension, are also expected this week.

CUNA chair at White House small biz act ceremony

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WASHINGTON (9/28/10)—President Barack Obama on Monday officially signed H.R. 5297, the Small Business Jobs and Credit Act, which authorizes a $30 billion fund to bolster bank lending to small business. Credit Union National Association (CUNA) Chairman Harriet May was among those attending the signing ceremony. May on Monday thanked President Obama on behalf of credit unions for expanding Small Business Administration (SBA) loan limits, a move that will allow credit unions to increase their work with small business-owning members. Erie FCU's Sandi Carangi also attended the signing ceremony on behalf of her credit union. Specifically, the legislation increases SBA 7(a) loan limits to $5 million from $2 million, 504 loan limits to $5.5 million from $1.5 million, and 7(a) "Express Loans" to $1 million from $300,000. The bill also ups the definition of microloans from $35,000 to $50,000. The bill will also allow, as of 2011, retirement savings plans sponsored by state and local governments to include Roth accounts. Roth accounts are currently only available in 401(k) and 403(b) plans. Participants in those 401(k) and 403(b) plans, as well as governmental 457(b) plans, will be permitted to roll their pre-tax account balances into a Roth account. The legislation also extends portions of the Stimulus Act that eliminate borrower fees on SBA 7(a) and 504 loans and extend the current 90% government guarantee on 7(a) loans through the end of this year. Credit unions sometimes cite high fees as a reason they are unable to particpate in SBA lending programs. The holding period of assets subject to a built-in gains tax has also been shortened to five years if the fifth taxable year in the holding period precedes the taxable year beginning in 2011. The bill also provides $1.5 billion in grants to existing state small business programs that help private lenders extend more credit to small businesses.

NFIP bill awaits Obamas signature

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WASHINGTON (9/27/10)—The House late last week approved legislation that would extend the National Flood Insurance Plan (NFIP) until Sept. 30, 2011. The NFIP legislation passed the Senate last week. The legislation will now move on to be signed by President Barack Obama. The NFIP lapsed for a period of time, beginning on June 1, but was restored in early July when H.R. 5569 was signed into law. The NFIP is now set to expire on Sept. 30. Legislation that would reauthorize the NFIP program until Sept. 30, 2015, and improve the program by adding a Flood Insurance Advocate and raising the maximum coverage limits, passed the House in July. A Senate vote has not been scheduled. The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

FTC proposal would further limit deceptive mortgage practices

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WASHINGTON (9/27/10)--The Federal Trade Commission (FTC) last week moved to further prevent deceptive mortgage practices by proposing rules that would ban “all material misrepresentations in advertising about consumer mortgages.” The rule would specifically target mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; and other entities under the FTC’s jurisdiction, the FTC said. The proposal does not address advertising disclosure requirements. This proposed rule would apply to state-chartered credit unions, but not federal credit unions. The Credit Union National Association (CUNA), in a response to an advanced notice of proposed rulemaking released earlier this summer, agreed that the FTC should do more to address predatory lending practices. However, CUNA added, any developed rules 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. CUNA also recommended that the FTC’s rules focus on practices that are not adequately addressed under current law, but not prohibit or favor certain practices. The FTC is seeking comments on the potential costs and benefits of the rule. The proposed rule will be open for a 45-day public comment period. For the FTC release, use the resource link.

Inside Washington (09/26/2010)

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* WASHINGTON (9/27/10)--The National Association of State Credit Union Supervisors (NASCUS) commended the National Credit Union Administration for “completing the enormous and complicated task of stabilizing the corporate credit union system and re-promulgating its corporate rule,” said NASCUS President/CEO Mary Martha Fortney in a statement Friday. Her comments came after NCUA approved its final Part 704, Corporate Credit Unions, and presented its legacy assets plan. “From the start, state regulators and NCUA worked to address corporate credit union issues in an equitable fashion that protects safety and soundness with a focus on enhanced joint federal-state regulator supervision,” Fortney said. “NASCUS and state regulators anticipate continuing their active role as the final rule is implemented. NASCUS has always viewed improving the corporate system as an ongoing effort, and we will continue to work with NCUA on areas that remain of concern to the state system” ... * WASHINGTON (9/27/10)--President Barack Obama is expected to sign into law today a $30 billion small-business lending fund. The Treasury is expected to work with regulators within a week to create the program’s application and term sheet. Program funds could be available within two to three months, said American Banker (Sept. 24). However, it is not yet known how the capital will be treated, what the underwriting rules for small business loans will be, what criteria will be required for approving an application and how banks can convert Troubled Asset Relief Program (TARP) capital to the new program. Under the program, banks with less than $10 billion in assets can apply for capital with a dividend payment of 5%. The capital would be free of TARP-like restrictions, including executive compensation and warrants ... * WASHINGTON (9/27/10)--Lawmakers shared their concerns during a meeting Thursday about the future of the Federal Housing Administration (FHA), said American Banker (Sept. 24). During a Senate Banking Committee hearing, panel members said they weren’t sure the agency would be able to bounce back because of its growing share of the mortgage market. However, David Stevens, FHA commissioner, said the agency’s third-quarter report indicates its Mutual Mortgage Insurance Fund increased by $450 million. It was originally projected to suffer a loss of $2.6 billion during the first three quarters of the year. Stevens said the agency is still vulnerable if prices drop, and that FHA remains cautious. Last month, Congress approved legislation that would allow FHA to raise annual premiums to cover losses in its trust fund and reduce up-front assessments. The reduction aims to make it easier for a borrower to sell a home. Congress also has asked the Government Accountability Office (GAO) to examine FHA’s finances and come up with recommendations. One suggestion was to give FHA a timeline to restore its capital ratio to 2%. For the FHA to reach that goal, Stevens said, it would need to consider discount rates in the market, recovery of defaulted loans and the home price index ...

NCUA acts on Corp. CUs legacy assets

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ALEXANDRIA, Va. (9/27/10)—The National Credit Union Administration (NCUA) on Friday placed three more corporate credit unions into conservatorship, finalized new rules governing the corporates and approved a plan to isolate and securitize the corporates so-called “legacy” assets. NCUA Chairman Debbie Matz called the agency's much-anticipated actions "a comprehensive solution to the problems afflicting the corporate credit union system." The three corporates placed into conservatorship are Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU. The corporate credit unions, whose assets totaled $7.4 billion, $9.5 billion, and $1.2 billion, respectively, will join U.S. Central FCU and Western Corporate FCU (WesCorp) under conservatorship. While business at the three credit unions will largely continue unimpeded, NCUA Chairman Debbie Matz did say that the CEOs of both Members United and Southwest had been replaced. Constitution will likely be merged into another existing corporate, she added. As a result of the trio of NCUA actions, the NCUA now holds 70% of all assets held in corporate credit unions and 98% of the distressed, so-called “legacy assets” that have caused the corporate credit union system problems. The legacy assets are made up primarily of private label, residential mortgage-backed securities that were significantly devalued during the turmoil in the overall mortgage market. The NCUA plans to deal with these losses by isolating and funding $50 billion of these assets. The assets will then be reissued as NCUA Guaranteed Notes (NGN), which will then be sold on the open market. The NCUA said that additional information about the securitzation process will be made available as the process moves forward. "There are some positive aspects for credit unions in the actions that NCUA has taken, the biggest being that credit unions will only have to cover the actual, eventual credit losses--and nothing else, including market losses," commented CUNA President/CEO Bill Cheney. "We advocated for that and are gratified the agency listened to us. However: The credit losses will be substantial--in a range now estimated of between $8 billion to $10 billion; but only time will tell exactly how much or how little." The revised corporate rules that NCUA adopted today will implement stronger capital requirements on the corporates, establish concentration limits on investments, revise asset-liability management requirements and change governance standards. The revisions track close to what the agency initially proposed and are generally in line with what CUNA's Corporate CU Task Force has recommended (see related story). CUNA's Cheney noted that the NCUA has put out a great deal of detail that must be pored over. "We’ll have to take the time to cull through everything that the agency has done in order to have a clear picture of its impact on credit unions," he noted. However, Cheney said, the NCUA’s actions "have the potential to move us past this chapter and better position the credit union system for the future--while being invisible to consumers who rely on credit unions for affordable financial services.” The NCUA has developed a web page to provide additional resources on the actions taken Friday. For the NCUA page and a CUNA summary of the NCUA’s actions, use the resource links.

NCUA reveals new corporate CU rule

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ALEXANDRIA, Va. (9/27/10)—The National Credit Union Administration (NCUA) on Friday revealed the final corporate credit union rule. Credit Union National Association (CUNA) President/CEO Bill Cheney said that CUNA is “gratified” that the new corporate rule reflected many of the recommendations of CUNA’s Corporate Task Force. “We firmly believe it offers a solid model for corporate credit unions going forward,” Cheney added. Overall, the NCUA’s corporate credit union final rule mirrors the agency’s proposed rule, which was released earlier this year. The final corporate rule amends Part 704 of the NCUA's rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. The new corporate rule will prohibit the purchase of private-label mortgage-backed securities or subordinated securities. So-called "golden parachute" executive compensation packages will not be allowed to be awarded to executives of troubled corporates, and all corporates will be required to disclose their executive compensation packages. Corporate boards must also be comprised of natural person credit union employees that have attained the level of CEO, chief financial officer, or chief operating officer or treasurer/manager at their respective credit unions. The majority of the corporate rules will become effective 90 days after they are published in the Federal Register. However, the rules impacting capital requirements and the activities of credit union service organizations (CUSOs) will have delayed effective dates, the NCUA said. NCUA General Counsel Bob Fenner added that the NCUA would release additional refinements to its corporate rule in the future. The NCUA plans to address corporate membership fees, internal reporting, risk management, and other issues, he added. The NCUA also voted to delegate corporate credit union CUSO authority to the Director of the Office of Corporate Credit Unions (OCCU). The NCUA Board may also play a role in the approval or disapproval of a corporate credit union CUSO’s activities if those activities go “beyond the scope” of activities covered by section 712.5 of NCUA regulations. Potential guidelines for new corporate credit union charters were also released during the meeting. The guidelines will be open to public comment for thirty days. The NCUA also announced plans to bundle portions of the $50 billion in troubled assets currently held by U.S. Central FCU, Western Corporate FCU (WesCorp), and some other corporates into individual securities that could then be sold on the open market. (See related story: NCUA acts on Corp. CUs, legacy assets)

Compliance Credit report concerns addressed by CUNA

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WASHINGTON (9/24/10)--Dozens of questions pour into the Credit Union National Association’s (CUNA’s) inboxes each month seeking guidance on the Fair Credit Reporting Act (FCRA). They range from “do I need a member’s signature to pull a credit report,” to more complex questions regarding the new risk-based pricing regulations. Most recently, new questions are arising about what changes are coming in 2011 as a result of the Dodd-Frank financial reform law. These and many other questions will be addressed in a series of four CUNA webinars to be held this fall:
* Sept. 27: Consumer Reports & Basics Every Credit Union Needs to Know * Oct. 4: Furnishing Information to a Credit Reporting Agency * Oct. 25: Rules Addressing Fraud & Identity Theft * Nov. 1: Risk Based Pricing Notices
The first program scheduled for next Monday, Sept. 27 will cover what every credit union needs to know about:
* What constitutes a permissible purpose for pulling a credit report? * What can you do with the information once you get it? * When should you provide an adverse action notice? * What are the rules for pulling credit reports on employees?
Monday’s webinar will provide valuable information for any credit union's compliance, lending and operations staff. Use the resource link for more information or to register for any or all of these sessions. CUNA FCRA Webinars

Inside Washington (09/23/2010)

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* WASHINGTON (9/24/10)--The Federal Deposit Insurance Corp. (FDIC) is pressing ahead with a May 11 proposal that would require a living will from about 40 companies within six months of the rule’s adoption (American Banker Sept. 23). Michael Krimminger, deputy to the FDIC chairman for policy, said the agency plans to move ahead with the rule. There is a need to make sure the agency can protect the Deposit Insurance Fund, he added. Before the regulatory reform bill was signed into law in July, FDIC proposed requiring insured depository institutions with $10 billion in assets that are controlled by holding companies with $100 billion in assets to submit a living will. Some had suggested the FDIC withdraw the proposal, since the Dodd-Frank Act had a broader mandate ... * WASHINGTON (9/24/10)--Creating new financial products, such as reloadable prepaid debit cards, will be the key to shifting low-income individuals into the financial system, said Michael Barr, Treasury assistant secretary for financial institutions, during a recent conference. Financial institutions can generate revenues while also offering affordable and safe accounts for the low-wealth. Mobile applications, like texting, can convey account information or facilitate remote check deposits (American Banker Sept. 23). These applications are growing and have the potential to reduce costs. Earlier this month, Treasury announced that it is launching a program that would allow some U.S. workers’ tax refunds to be directly deposited into a low-cost bank account ... * WASHINGTON (9/24/10)--A new day of financial products and regulation is coming, according to Elizabeth Warren, who has been tapped by the Obama administration to lead the proposed Consumer Financial Protection Bureau (American Banker Sept. 23). Speaking Wednesday in her first speech as assistant to the president and special adviser to Treasury Secretary Timothy Geithner, she said the financial system has become “out of whack” and encouraged greater transparency. Bankers are nervous about upcoming changes, but Warren said she thinks a “new world” of regulations for the credit markets and consumers is coming ... * WASHINGTON (9/24/10)--Herb Allison, head of the Troubled Asset Relief Program, is stepping down (American Banker Sept. 23). Allison announced his departure on Wednesday from the program, where he has been two years. He previously was president of Fannie Mae. Tim Massad, chief counsel and chief reporting officer of the Office of Financial Stability, will succeed Allison ...

NCUA reveals final corp. CU rule

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NEW: ALEXANDRIA, Va. (9/24/10)—The National Credit Union Administration (NCUA) on Friday revealed the final corporate credit union rule. Credit Union National Association President/CEO Bill Cheney said that CUNA is “gratified” that the new corporate rule reflected many of the recommendations of CUNA’s Corporate Task Force. “We firmly believe it offers a solid model for corporate credit unions going forward,” Cheney added. Overall, the NCUA’s corporate credit union final rule mirrors the agency’s proposed rule, which was released earlier this year. The final corporate rule amends Part 704 of the NCUA's rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio for adequately capitalized corporate credit unions. The new corporate rule will prohibit the purchase of private-label mortgage-backed securities or subordinated securities. So-called "golden parachute" executive compensation packages will not be allowed to be awarded to executives of troubled corporates, and all corporates will be required to disclose their executive compensation packages. Corporate boards must also be comprised of natural person credit union employees that have attained the level of CEO, CFO, or COO or treasurer/manager at their respective credit unions. The majority of the corporate rules will become effective 90 days after they are published in the Federal Register. However, the rules impacting capital requirements and the activities of Credit Union Service Organizations (CUSOs) will have delayed effective dates, the NCUA said. NCUA General Counsel Bob Fenner added that the NCUA would release additional refinements to its corporate rule in the future. The NCUA plans to address corporate membership fees, internal reporting, risk management, and other issues, he added. The NCUA also voted to delegate corporate credit union CUSO authority to the Director of the Office of Corporate Credit Unions (OCCU). The NCUA Board may also play a role in the approval or disapproval of a corporate credit union CUSO’s activities if those activities go “beyond the scope” of activities covered by section 712.5 of NCUA regulations. Potential guidelines for new corporate credit union charters were also released during the meeting. The guidelines will be open to public comment for thirty days. The NCUA also announced plans to bundle portions of the $50 billion in troubled assets currently held by U.S. Central Federal Credit Union, Western Corporate Federal Credit Union (WesCorp), and some other corporates into individual securities that could then be sold on the open market. (See related story: NCUA acts on Corp. CUs, legacy assets)

Small business bill gets final approval

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WASHINGTON (9/24/10)--Job creation legislation that will provide small banks with $30 billion in taxpayer funds to lend to small businesses should soon become law after the U.S. House on Thursday passed H.R. 5297 by a 237 to 187 vote. The small business job creation legislation, which passed the Senate by a 61 to 38 vote last week, also provides tax breaks to both small and larger businesses. Legislation that would lift the current credit union member business lending (MBL) cap to 27.5% of total assets was not added to the bill, but the Credit Union National Association (CUNA) continues to work to bring the MBL cap legislation to the House or Senate floors as stand-alone legislation or as an amendment to a future bill. CUNA has estimated that credit unions could infuse a new $10 billion in credit to small businesses--at no cost to the taxpayer--in the first year after a higher cap was enacted. Sen. Mark Udall (D-Colo.), the main sponsor of a Senate MBL bill, has estimated that lifting the cap could create $200 million in new small business funding in his state. CUNA has estimated that lifting the cap would inject $10.8 billion in new funding into the nation’s economy in the first year following enactment. These funds would help small business owners create over 100,000 new jobs, according to CUNA.

Matz fed regulators hold first FSOC meeting on Oct. 1

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WASHINGTON (9/24/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz will be among those in attendance when the U.S. Treasury hosts the first meeting of the new Financial Stability Oversight Council (FSOC) on Oct. 1. Treasury Secretary and FSOC Chairman Tim Geithner, Federal Reserve Chairman Ben Bernanke, Acting Comptroller of the Currency John Walsh, Securities and Exchange Commission Chairman Mary Schapiro, and Federal Deposit Insurance Corp. Chairman Sheila Bair will also be in attendance. Representatives from the Commodity Futures Trading Commission and the Federal Housing Finance Agency will also attend the meeting. All are members of the council. The oversight council, which was created when the Dodd-Frank financial reform package was signed into law, will provide a forum for discussion between various regulatory agencies and will oversee the resolution of troubled financial institutions. The council will monitor markets for disturbances, and will also promote market discipline by “eliminating expectations on the part of shareholders, creditors, and counterparties that the government will shield them from losses in the event of failure,” the Treasury added in a release. For the full Treasury release, use the resource link.

CUs eligible for iGo Directi recognition from Treasury

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WASHINGTON (9/23/10)--With the “big guy” awards behind them, the U.S. Treasury Department’s Go Direct campaign is now turning its attention to recognizing the efforts of smaller credit unions and banks to get consumers to sign on for direct deposit of federal benefits checks. Registration is now open for the Go Direct Community Ambassadors Program. That program recognizes the efforts of small- and medium-sized financial institutions that “go the extra mile in promoting direct deposit to senior citizens, people with disabilities, veterans and others who receive federal benefits.” Financial institutions with fewer than 100 branches are eligible to register. To be recognized as a Community Ambassador, a financial institution must complete at least two of the activities listed below between October 2010 and March 2011. That participation must be reported using a simple check-box form that will be distributed via email throughout the program period. Activities include:
* Posting a web banner on your financial institution's website; * Including a statement message or insert in statements to customers or members; * Ordering and distributing in-lobby materials; * Communicating with tellers or distributing a Go Direct campaign communication kit to staff; and * Creating and implementing a teller or branch incentive program or competition.
The Go Direct campaign offers free materials for participants to spur ideas for how to share information about the benefits of direct deposit with their members or customers. (Use resource link.) Credit unions and banks that successfully participate in the Community Ambassadors Program will receive a letter of recognition and a certificate from the Treasury Department. In addition, they also will receive a web banner and suggested newsletter copy they can use to announce their recognition as a 2010/2011 Go Direct Community Ambassador. Also recently, State Employees' CU, Raleigh, N.C., was among six financial institutions named by Treasury as 2010 Go Direct Champions--an enrollment recognition program for larger institutions. The six champions beat out 13 other competitors. (News Now Sept. 16) The Credit Union National Association is a national partner with Treasury for its Go Direct campaign and was on hand when the government launched the campaign on the National Mall in September 2005.

Cheney backs CU issues on Bloomberg Radio

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WASHINGTON (9/23/10)—In a Wednesday appearance on Bloomberg Radio’s Taking Stock with Pimm Fox, Credit Union National Association President/CEO Bill Cheney said that America’s credit unions continue to seek the opportunity to put their combined $800 billion in assets to good use for small businesses. One way that credit unions can put these assets into action is through lending to their business-owning members, and Cheney took the broadcast opportunity to support legislation that would lift the cap on member business lending (MBL) from the current 12.25% limit to 27.5% of a credit union’s assets. Cheney added that while the amount of business loans that are provided by banks continues to diminish, the number of credit unions bumping up against the arbitrary MBL cap continues to rise, as they seek to help their small business owning members deal with economic struggles and drying up credit from banks. Lifting the cap would result in $10 billion in new loans to small businesses--in just the first year that new authority was granted--creating over 100,000 new jobs, Cheney said. “We all know we need more jobs, and this is a great way to do it,” he added. CUNA underscores that this boost to small businesses comes at not cost to credit unions. Cheney noted that the MBL cap increase has the support of the Obama administration and many members of the U.S. Congress. He added that the only opposition seems to be bankers who do not want the competition. Bloomberg's Fox observed that it seems that banks don't want the competition--but they don't want to make the loans themselves. Cheney concurred. Cheney also underscored during the 30 minute interview that until 10 years ago, there was no ceiling on credit union MBLs.

Senate votes to extend flood insurance into 2011

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WASHINGTON (9/23/10)—The Senate on Tuesday night approved legislation that would extend the National Flood Insurance Plan (NFIP) until Sept. 30, 2011. The legislation must now pass the House before it can move on to be signed by President Barack Obama. The NFIP lapsed for a period of time, beginning on June 1, but was restored in early July when H.R. 5569 was signed into law. The NFIP is now set to expire on Sept. 30. Legislation that would reauthorize the NFIP program until Sept. 30, 2015, and improve the program by adding a Flood Insurance Advocate and raising the maximum coverage limits, passed the House in July. A Senate vote has not been scheduled. The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

Corp. CU plan will prohibit MBS purchases says Matz

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WASHINGTON (9/23/10)--The purchase of private-label mortgage-backed securities or subordinated securities will be prohibited by the National Credit Union Administration's (NCUA) upcoming corporate credit union rule, NCUA Chairman Debbie Matz said earlier this week. Private label mortgage-backed securities make up the majority of troubled legacy assets that are still held by U.S. Central Federal Credit Union and Western Corporate Federal Credit Union (WesCorp), as well as other corporate credit unions. These troubled legacy assets resulted in corporate credit unions recognizing billions in losses, with U.S. Central and WesCorp losing a combined $9 billion to $11 billion, according to Credit Union National Association estimates. The NCUA, as it develops its legacy asset plan, is attempting to deal with as much as $50 billion in long-term assets. The legacy asset plan is also expected to be reviewed this Friday. Matz revealed some additional details of both the pending corporate rule and the legacy asset review in a speech delivered before the National Association of Federal Credit Union's annual conference on Tuesday. Discussing the corporate rule, Matz said that corporate credit unions would be subject to leverage capital requirements, and would need to adhere to Basel I standards in the future. The corporates would also be subject to the same Prompt Corrective Action requirements as all other federally-backed financial institutions, going forward. The NCUA will also limit the amount of funds that a corporate credit union may receive from any credit union to 15% of the corporates total assets. The agency will also impose some limitations on corporate credit union leadership by raising “standards for corporate board member qualifications” in an attempt to “elevate each director’s level of experience and expertise.” Matz added that one of the NCUA’s core goals as they devise their legacy assets plan is “to devise a way to safely deal with the legacy assets at the lowest possible cost consistent with sound public policy.” “A comprehensive plan must isolate the riskiest legacy assets from the corporate system, allowing the whole credit union system to move forward unburdened by the impaired assets,” she said. For the full speech, use the resource link.

Inside Washington (09/22/2010)

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* WASHINGTON (9/23/10)--House Financial Services Committee Chairman Barney Frank (D-Mass.), center, recently met with New Jersey Credit Union League President/CEO Paul Gentile, left, and Director of Governmental Affairs Chris Abeel at a recent reception at Credit Union House in Washington, D.C. Frank said that a new bill aimed at making Community Reinvestment Act (CRA) requirements more rigid will not include credit unions. Frank also said he would work to address credit unions’ concerns with interchange regulations (The Daily Exchange Sept. 22). Frank said he opposed the interchange language and that he worked to make changes that should benefit credit unions, such as the addition of language to prohibit discrimination against credit unions and other smaller card issuers that are not covered by the interchange provisions. (Photo provided by the New Jersey Credit Union League) ... * WASHINGTON (9/23/10)--Democrats on the House Financial Services Committee are looking to expand the Community Reinvestment Act (CRA). However, the potential changes will not affect credit unions, according to a recent message Chairman Barney Frank (D-Mass.) gave credit unions at a Hike the Hill event. The bill will likely target investment banks, mortgage brokers and insurers (American Banker Sept. 22). Consumer groups are encouraging stricter oversight on CRA requirements for banks, including more detailed ratings and more penalties for failure. Financial observers said it’s unlikely the bill will be approved this year. With upcoming elections in November, Republicans--who are favored to win more seats in the Senate--may try and scale back the CRA law next year, said Mark Calabria, former Senate aide and director of the Cato Institute ... * WASHINGTON (9/23/10)--The Federal Housing Finance Agency (FHFA) on Wednesday reported that U.S. home prices fell 0.5% between June and July. The FHFA recorded a 3.3% home sale price decline from July 2009 until July 2010, with the total U.S. home price index falling to 13.8% below the April 2007 index ... * WASHINGTON (9/23/10)--The Federal Housing Administration’s David H. Stevens, who is assistant secretary of housing, testified Wednesday before the House Financial Services Committee on progress the housing agency has made toward strengthening its financial condition. Noting that last year the FHA informed the U.S. Congress of an independent actuary’s findings that FHA’s secondary reserves had fallen below the required level, Stevens said that now, 10 months later, the FHA is on a path “that will put the agency in a stronger financial position for the future.” In written testimony Stevens said, “Of course, we remain cautious, and the job is not yet done. With home prices uncertain, our continued vigilance in strengthening both loan quality and performance for future loans is particularly important" ...

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 ...

Inside Washington (09/20/2010)

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* WASHINGTON (9/21/10)--Under the Dodd-Frank act, the Federal Deposit Insurance Corp. (FDIC) can set standards for how large financial institutions will wind down in the event of a failure. The FDIC is expected to release a rule soon that would implement the system. During a roundtable Aug. 31, bankers voiced their concerns about the rule, urging the FDIC to provide certainty about receiverships during a failure. They also said they didn’t want to be forced into drafting living wills that are too strict (American Banker Sept. 20). Meeting participants also discussed how much of a failed company the FDIC would need to place in a bridge firm, which the FDIC would continue operating to prevent the company’s failure from affecting other institutions. If another crisis hits, some observers said the agency may need to put more into a bridge firm than less. However, tighter regulations from the new law could make an institution’s failure more isolated and take some pressure off FDIC about systemic risks to other institutions ... * WASHINGTON (9/21/10)--The Securities and Exchange Commission (SEC) Friday proposed a rule that would lead to better disclosures in banks’ quarterly financial results and aim to prevent banks from entering into finance agreements to hide their financial position. Banks also would have to reveal their maximum and average assets, and period-end assets each quarter (American Banker Sept. 20). The proposal also could apply to nonfinancial firms. Some banks have been criticized for reducing their assets before the quarter end. An SEC review indicated that Citigroup, for instance, misclassified more than $9 billion in repo loans ...

HMDA report Growing reliance on FHA-backed loans

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WASHINGTON (9/21/10)--Data collected under the Home Mortgage Disclosure Act (HMDA)reflects a growing reliance on loans backed by the Fedearl Housing Administration (FHA) during the recent mortgage market difficulties. The FHA's share of first-lien loans increased to 37% in 2009, up from 26% in 2008 and 7% in 2007, the Federal Financial Institutions Examination Council (FFIEC) reported on Monday. The FFIEC released data covering mortgage-related “applications, originations, purchases of loans, denials, and other actions” at over 8,000 U.S. financial institutions. The data compile information on 15 million mortgage applications and 4.3 million loan purchases, as well as 210,000 pre-approval requests, and include “disclosure statements for each financial institution, aggregate data for each metropolitan statistical area (MSA), nationwide summary statistics regarding lending patterns, and Loan/Application Registers (LARs) for each financial institution, the FFIEC said. The HMDA data also include information on various types of loans, the property types of homes held under those loans, the location, and the sex, ethnicity, and income level of the homeowners. The report noted that the incidence of higher-priced lending for loan originations with applications taken before Oct. 1, 2009, was 5.7%. That same number decreased to 3.8% for loans originated after Oct. 1. The FFIEC has also compiled a similar report on private mortgage insurance (PMI) applications. Panelists at a recent Federal Reserve Board hearing on possible changes to its rules implementing HMDA discussed the possibility of bringing nondepository lenders under HMDA rules. Some members of the panel, which included Madison-Wis.-based UW CU Chief Credit Officer Mike Long, also stated that the asset size threshold for reporting loans under HMDA should be based on number of loans, instead of asset size, which is the current threshold. The potential inclusion of reverse mortgage loans under the HMDA reporting requirements was also discussed during the hearing. The panelists also said that financial institutions should be given 24 months to comply with any changes that are adopted.

CUNA working group describes next steps for corporate CUs

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WASHINGTON (9/21/10)--Whether today’s corporate credit union network can evolve to be the best provider of financial services to credit unions hinges on its ability to make "deep and far-reaching changes" needed to do so, according to a final report issued by the Credit Union National Association’s (CUNA’s) Corporate Credit Union Next Steps Working Group. And if it does not make the needed changes, credit unions will have a variety of options other than the corporates to meet their needs, which are detailed in the CUNA working group's report. Other factors that will affect the corporates’ ability to remake themselves include coming revisions to corporate credit union regulations from the National Credit Union Administration (NCUA), and the specifics of NCUA’s upcoming plan for dealing with corporates’ legacy assets. he NCUA board is expected to act on both issues Sept. 24. “If the necessary changes do not occur,” the Working Group concluded, “credit unions will have a variety of options other than corporates to meet their needs, although many credit unions will find these alternatives more costly and less service driven than they have experienced with corporates in the past.” The Next Steps Working Group was formed to further explore the recommendations issued in February 2010 by CUNA’s Corporate Credit Union Task Force. Both groups were chaired by Terry West, CEO of VyStar Credit Union, Jacksonville, Fla. The task force report called for a sharply revised corporate business model, with smaller balance sheets and greater focus on payments-related rather than investment services. The Next Steps Working Group had the mission of ensuring credit unions continue to have access to the services they have been relying on corporates to provide. “Without question, today’s corporate model will need to change,” West said. “Our working group’s report outlines the factors driving that change and the options available—through the corporates or otherwise—to ensure credit unions continue to have access to the critical investment, credit, payments and settlement services they need.” The Next Steps Working Group reviewed multiple sources of information and talked with numerous representatives from corporates and other providers of financial services. Its final report was presented to CUNA’s Governmental Affairs Committee in late August and received by the CUNA board at it Sept. 15 meeting in Madison, Wis. The group determined that corporates’ current business model will need to evolve due to the difficulty of attracting new capital from credit unions coupled with significant new capital requirements based on asset size. In this environment, corporates with small balance sheets, and therefore small capital requirements, are most likely to succeed. Specifically:
* Smaller corporates will need to arrange for the services previously offered in conjunction with US Central Federal Credit Union (now in conservatorship) by contracting with third parties, combining with other smaller corporates to provide these services or merging into larger corporates with the necessary infrastructure; and *The issue for larger corporates is to determine which has the best infrastructure to efficiently provide services.
“The responsibility for bringing about the necessary changes lies with three groups: the members of corporates, the boards of corporates and the management of corporates,” the Working Group stated. Based on its analysis, the CUNA working group concluded the current corporate system has the core elements to meet the needs of most credit unions, and that a system owned and controlled by credit unions is most likely best for the movement in the long run. “However, it is not certain that those resources will be trimmed down and rearranged adequately or quickly enough to meet the needs of credit unions,” the report added. “In the resolution of these issues, it is the interests of credit unions that are paramount, rather than the interests of the current corporate credit union structure.” Other elements of the Working Group’s report:
* Describe the services credit unions have sought from corporates in the past; * List some of the alternate providers of these services credit unions can turn to in the future; * Discuss the selection and due diligence process credit unions will need to use in selecting financial services providers; * Outline the current condition of corporate credit unions; and * Comment on the types of changes corporates will need to make.

Hearings highlight this week in Congress

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WASHINGTON (9/21/10)--As the U.S. House continues to near its recently announced Oct. 1 election-year recess target date, the Small Business Lending Fund Act remains one of many items on its docket. That bill was passed 61 to 38 by the U.S. Senate last week. While legislation that would lift the current credit union member business lending (MBL) cap to 27.5% of total assets was not added to the bill, the Credit Union National Association remains hopeful that MBL cap legislation could still come to the House floor as stand-alone legislation or as an amendment to a future bill. The House is expected to pass the small business legislation. Another priority for some members of the House this week will be a Friday Financial Services Committee hearing on "Executive Compensation Oversight after the Dodd-Frank Wall Street Reform and Consumer Protection Act." The Senate also will hold several hearings this week, including today's banking committee hearing on job and economic growth. Gov. Ed Rendell (D-Pa.), as well as U.S. Treasury officials Roy Kienitz and Alan Krueger, are among those scheduled to testify. A number of luminaries will also attend Wednesday's National Flood Insurance Plan (NFIP) hearing. Sens. Richard Durbin (D-Ill.) and Roger Wicker (R-Miss.) will testify alongside the Government Accountability Office's Orice Williams Brown. The NFIP is authorized through the end of this month, and legislation that would reauthorize the program until Sept. 30, 2015, add a Flood Insurance Advocate, and raise the maximum coverage limit passed the House in July. Other hearings that of interest to credit unions include a Thursday Senate Banking Committee hearing on the "Federal Housing Administration: Current Condition and Future Challenges" and a Wednesday Senate subcommittee hearing on S.3742, the "Data Security and Breach Notification Act of 2010." Data security has long been a hot topic on the Hill, and several data security bills worked their way through the House and Senate in 2005, 2006 and 2007, although lawmakers never completed debate on the issue. The data security debate was renewed last year, and while a pair of bills aimed at addressing data breach disclosure and personal data security passed out of Senate committee markups, the bills never saw full votes in neither the House nor the Senate.

NCUA makes 250k acct. insurance permanent

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ALEXANDRIA, Va. (9/20/10)--The National Credit Union Administration (NCUA) late last week made permanent its $250,000 account coverage limit. The NCUA action codifies changes that occurred with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July. The account coverage is provided by the NCUA’s National Credit Union Share Insurance Fund (NCUSIF). The $250,000 coverage limit would have expired on Dec. 31, 2013. In a Friday release, NCUA Board Chairman Debbie Matz said that the coverage enchancement provides “an extremely visible and important benefit to consumers.” Noting the NCUA's pending work with financial expert Suze Orman, Matz added that the NCUA “is committed to making sure that the financial public is fully aware of the newly permanent $250,000 limit.”

Cheney Warren speak as she takes on CFPB role

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WASHINGTON (9/20/10)--Harvard Law Professor Elizabeth Warren on Friday “enthusiastically agreed” to take on the task of setting up the government’s Consumer Financial Protection Bureau (CFPB). Warren’s official position will be Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB. In a blog post on whitehouse.gov, Warren said that the CFPB is “based on a pretty simple idea: people ought to be able to read their credit card and mortgage contracts and know the deal.” The CFPB is “based on the simple idea that if the playing field is level and families can see what’s going on, they will have better tools to make better choices,” she added. Credit Union National Association (CUNA) President/CEO Bill Cheney spoke to Warren on Friday. He said that CUNA looked forward to working with her as she takes on the role of ramping up the CFPB. CUNA is “particularly eager” to work with Warren as the CFPB begins its work to “consolidate and streamline consumer protection rules.” Such work will help reduce the regulatory burden “of those who have been regulated and performed well, such as credit unions,” Cheney added. The CFPB, which was created when the Dodd-Frank financial regulatory reform package was passed earlier this year, will also monitor financial markets for evidence of systemic risk.

CUNA comments on increased CARD Act flexibility

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WASHINGTON (9/20/10)--The Credit Union National Association (CUNA) in a comment letter said that it supports an amendment to the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) that delays the effective date of portions of the Act until Jan. 31, 2011. Specifically, the amendment pushes back the Aug. 22 effective date for new disclosures on gift certificates, store gift cards, and general-use prepaid cards that were issued before April 1. To be eligible for the delayed effective date, “disclosures must be provided to consumers by way of toll-free telephone numbers, websites, signage in stores, and general advertising that inform consumers that there will be no dormancy, inactivity, or service fees and that these cards, specifically the underlying funds, will not expire, regardless of what is printed on the card,” the letter added. This information, which can be provided to consumers directly or through associated retailers, must be made available until Jan. 31, 2013 , although the in-store signs and general advertising will not be required on or after Jan. 31, 2011. More generally, CUNA said that it appreciated “the additional flexibility in the interim final rule that will facilitate compliance with these extended effective date provisions.” For the full comment letter, use the resource link.

Compliance Respond quickly to opt-in requests

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WASHINGTON (9/20/10)--In the event that a credit union member elects to revoke his or her overdraft opt-in status, the Credit Union National Association (CUNA) has recommended that credit unions react by honoring this request “as soon as realistically possible.” In September’s Compliance Challenge, CUNA said that Regulation E specifically states that credit unions (and other financial institutions) must implement an opt-in revocation request “as soon as reasonably practicable.” The Fed did not prescribe a specific period of time for the credit union to honor the member’s revocation request. That's because “the appropriate time period may depend on a number of variables, including the method used by the consumer to communicate the revocation request (for example, in writing or orally) and the channel by which the request is received (for example, if a consumer sends a written request to an address specifically designated to receive consumer opt-in and revocation requests),’” CUNA added. Opt-in requests are effective until a member/customer revokes opt-in consent, or the financial institution no longer provides the service. The Compliance Challenge also covered the notifications that credit unions must provide to members that opt-in to overdraft programs. According to CUNA, the Federal Reserve determined that requiring “subsequent notice” of a member’s overdraft status “is unnecessary when the consumer has affirmatively elected to enroll in the overdraft service and ... receives a record of their right to revoke their opt-in.” Credit unions that simply provide written or, in some cases, electronic overdraft program consent forms to their members, and confirm that consent with their members, are in compliance with the newly established overdraft rules. For more of CUNA’s September Compliance Challenge, use the resource link.

Inside Washington (09/17/2010)

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* WASHINGTON (9/20/10)--The Federal Housing Administration (FHA) has proposed dropping the maximum share of a buyer’s closing costs that sellers can pay to 3% from 6%, said American Banker (Sept. 17). The Department of Housing and Urban Development (HUD) has received more than 1,000 comment letters on proposals the FHA has made to beef up its mutual mortgage insurance fund, according to Vicki Bott, HUD deputy assistant secretary for single-family housing. Most have been about the proposal to halve seller concessions, she said. Loans with a high percentage of seller concessions are up to 1.5 times more likely to default, but there are considerations, Bott added. For instance, the proposal could more greatly impact $50,000 loans than $500,000 mortgages, she said ... * WASHINGTON (9/20/10)--The Securities and Exchange Commission (SEC) voted 5-0 to propose rules to heighten disclosure connected to some banks’ practice of curtailing debt at the end of a quarter (The Wall Street Journal Sept. 17). Under the proposal, all companies would have to disclose more about their short-term borrowings quarterly and annually. Banks already must disclose their debt levels annually, but the proposal would take the disclosure a step further by requiring companies to disclose debt levels and average and maximum short-term borrowing at the end of a quarter. Financial institutions, including hedge funds, broker-leaders and any lender would have stricter requirements ...

NCUA Assessment at 12.4 bp corp. CU rule Sept. 24

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ALEXANDRIA, Va. (9/17/10)--The National Credit Union Administration (NCUA) approved a 12.42 basis point National Credit Union Share Insurance Fund (NCUSIF) assessment at its Thursday open board meeting. Chairman Debbie Matz said, "I assure all stakeholders that the decision to charge this premium is not taken lightly. We understand that 2010 has been a challenging year. Many credit unions are struggling to contain costs. "But I can say unequivocally: This premium is absolutely necessary to replenish the share insurance fund to a level that will protect America's 90 million federally insured credit union members. Members who have kept their savings within the federal coverage limit have never lost a penny--and we intend to keep it that way." Matz said that the NCUA considered the current economic, employment, and credit union CAMEL Code conditions while making its assessment-premium determination. The 12.42-basis point assessment will be based on the total amount of federally insured shares held as of June 30. However, the assessment levied on credit unions with assets of $50 million or less will be based on the amount of federally insured shares held as of Dec. 31, 2009. Agency staff said the premium will increase the NCUSIF's equity ratio to 1.3%, and will replenish the NCUSIF with an estimated $933 million in funds. However, the NCUA warned that the NCUSIF equity ratio will immediately begin to decline: "The forward looking analysis shows the premium is sufficient to maintain the level above 1.2% through June 30, 2011, while falling to 1.17% by year-end 2011." Credit Union National Association President/CEO Bill Cheney said that while the premium “could have been somewhat lower,” the 12.42 basis point premium appears reasonable “under current circumstances.” The NCUA has not determined whether or not a similar assessment would be charged in 2011, and Matz said that the most important factor affecting the likelihood of any future assessments is the performance of individual credit unions. (For more of Matz’s statement, use the resource link.) The NCUA on Thursday sent a Letter to Credit Unions (No. 10-CU-17) detailing how those credit unions can plan and account for the expense of the NCUSIF premium. Credit unions can expect an invoice in October, and will be required to pay their assessments in November, the NCUA added. The NCUSIF also impacted another aspect of the NCUA’s practices, as the board unanimously approved a motion to use the accounting standards promulgated by the Federal Accounting Standards Advisory Board (FASAB) to monitor the status of the NCUSIF. According to NCUA staff, the FASAB standards would create a “more appropriate financial presentation” for the NCUSIF, and would give a clearer view of the NCUSIF’s condition to prime stakeholders. The FASAB standards are the “preferred” accounting standards for most federal entities that report to Congress and the Office of Management and Budget. The current status of the NCUSIF and the Temporary Corporate Credit Union Stabilization Fund were also covered during the meeting, with NCUA Chief Financial Officer Mary Ann Woodson reporting little change in the number of CAMEL Code 4/5 credit unions, or the percentage of total shares held by those credit unions. Finally, the NCUA announced that it will release its widely anticipated corporate credit union regulatory and legacy asset plans at a Sept. 24 special open meeting.

Short term loans secondary capital approved by NCUA

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ALEXANDRIA, Va. (9/17/10)—The National Credit Union Administration (NCUA) on Thursday made final a pair of interim final rules that altered Part 701 of NCUA regulations. The board approved a rule that would allow federal credit unions to offer short-term, small amount (STS) loans to their members. The loans are meant to serve as an alternative to predatory payday loans that are offered by other financial service providers. The rule, which requires the individual receiving the loan to be a member of the lending credit union for at least one month, could also potentially bring the unbanked into the credit union system. The final rule permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. The current federal credit union usury ceiling is 18%, and the final rule would therefore allow federal credit unions to charge 28% interest on STS loans. A $20 application fee may also be charged. The rule would impose limitations on the permissible term, amount, and fees for these types of loans, and would not permit lenders to roll over any of these short-term loans. However, the NCUA has amended the final rule to allow lenders to extend the term of some loans by as much as six months if the member is having trouble paying back the loan within its original timeframe. Federal credit unions may set a cap on the total monetary amount of STS loans granted to members, and will not be permitted to require loan payment via member payroll deduction. The STS rule is not the only way that federal credit unions can lawfully offer payday loan alternatives. Federal credit unions may, now or in the future, also offer short-term loan products with different qualities, so long as those loans' terms comply with Regulation Z and NCUA rules (other than the new STS rule). The interest rate on such loans, however, would be limited to no more than the 18% that is allowed by the generally applicable, federal credit union usury ceiling. The NCUA also approved an interim final rule that permitted low-income designated credit unions to redeem all or part of government-funded secondary capital, along with matching secondary capital, “at any time after it has been on deposit for two years.”

Inside Washington (09/16/2010)

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* WASHINGTON (9/17/10)--Elizabeth Warren, who chaired the Congressional Oversight Panel, will oversee the creation of the Consumer Financial Protection Bureau as an assistant to President Barack Obama, said an official briefed on the decision (The New York Times Sept. 16). Warren would be allowed to run the bureau without a traditional Senate confirmation. The bureau was created under the Dodd-Frank Act. Warren will be named also will be a special adviser to Treasury Secretary Timothy Geithner. She will report to both Geithner and Obama. The regulatory reform law gave the Treasury power over the bureau until a permanent director is confirmed by the Senate for a five-year term. Warren, 61, is a Harvard professor and authority on bankruptcy law ... * WASHINGTON (9/17/10)--During a recent hearing, Michael Barr, Treasury Department assistant secretary for financial institutions, said the Obama administration would unveil a plan next year to revamp the government-sponsored enterprises, Fannie Mae and Freddie Mac. However, many Republicans said the administration should already have a plan. The plan will be out in January, Barr said, although he had no other details (American Banker Sept. 16). Also during the hearing, Edward DeMarco, Federal Housing Finance Agency acting director, criticized large financial institutions for not repurchasing bad mortgages sold to Fannie Mae and Freddie Mac. As of the second quarter, Fannie and Freddie had $11 billion in outstanding repurchase requests. FHFA may take action if discussions between lenders and enterprises are not fruitful, DeMarco said ... * WASHINGTON (9/17/10)--An exemption for the Securities and Exchange Commission (SEC) regarding public disclosure requirements is needed because financial firms won’t provide some information to the agency if they think it will be released, SEC Chairman Mary Schapiro said Thursday (The New York Times Sept. 16). Some lawmakers have suggested closing a loophole in the financial overhaul law that would permit SEC to withhold from the public some records related to its monitoring of financial firms, including hedge funds and investment advisers. The exception is needed for SEC to develop a solid examination program to better protect investors, she said ... * WASHINGTON (9/17/10)--Senators told Treasury Secretary Timothy Geithner that China’s economic and trade policies are roadblocks to the U.S.’s economic recovery. Sen. Richard Shelby (R-Ala.) said China manipulates its currency to subsidize exports and asked why the administration is refusing to designate China as a currency manipulator (The New York Times Sept. 16). Geithner said he agreed that the Chinese currency was significantly undervalued and that the U.S. would work with the Group of 20 and the International Monetary Fund to mitigate some of the issues related to the currency issue. The administration also is reviewing a complaint by a United Steelworkers union regarding Chinese policies in the renewable energy sector ...

Small biz jobs bill approved by Senate

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WASHINGTON (9/17/10)--The U.S. Senate Thursday passed H.R. 5297, the Small Business Jobs and Credit Act, by a vote of 61 to 38. Credit unions launched a valiant effort to back an amendment to the bill that would have increased the member business lending (MBL) cap, but in the end the bill was passed with a $30 billion fund to encourage more bank lending, but without the MBL provision. The bill does have items of interest to credit unions. For instance, it includes higher Small Business Administration (SBA) loan limits, increasing SBA 7(a) loan limits to $5 million from $2 million, 504 loan limits to $5.5 million from $1.5 million, and 7(a) "Express Loans" to $1 million from $300,000. The bill also ups the definition of microloans from $35,000 to $50,000. Other provisions in the bill would:
* Allow, starting in 2011, retirement savings plans sponsored by state and local governments (governmental 457(b) plans) to include Roth accounts, which are currently available only in 401(k) and 403(b) plans: * Allow 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a Roth account; * Appropriate $505 million to extend through the end of this year some of the Stimulus Act provisions such as eliminating borrower fees on SBA 7(a) and 504 loans, as well as extending the increased government 90% (up from 75%) guarantee on 7(a) loans: and * Provide $1.5 billion in grants to existing state small business programs that help private lenders extend more credit to small businesses.
The bill also would temporarily shorten the holding period of assets subject to the built-in gains tax to five years if the fifth taxable year in the holding period precedes the taxable year beginning in 2011. One-third of U.S. banks are organized as Subchapter S banks. The bill now must go back to the House for a vote because the Senate modified the bill originally passed by the House.

Frank declares no CRA for CUs in new bill

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WASHINGTON (9/17/10)--House Financial Services Committee Chairman Barney
Click to view larger image House Financial Services Chairman Barney Frank hit a number of credit union hot topics in his address at Credit Union House on Thursday. The Massachusetts Democrat talked about CRA, interchange and pending member business lending legislation. (CUNA Photo)
Frank (D-Mass.) assured credit unions Thursday that Community Reinvestment Act (CRA) requirements are not in their future. Frank, speaking at a state league Hike the Hill gathering at Credit Union House, said that while his panel was set to discuss a new CRA bill at a Sept. 21 hearing, that bill does not include credit unions. “This is a fight you will not have to worry about in the future,” Frank told the Massachusetts/New Hampshire/Rhode Island credit union leagues. The hearing has since been cancelled. The House committee chairman went on to pledge continued work to address credit union concerns regarding new interchange regulations. Frank reminded the group that he opposed the interchange language and that he worked to make changes that should benefit credit unions, such as the addition of language to prohibit discrimination against credit unions and other smaller card issuers that are not covered by the interchange provisions. He said that he would continue to work to ensure that all costs were taken into consideration when setting interchange fees, not just the physical costs of swiping the card. Frank also addressed the subject of pending legislation to increase the credit union member business lending (MBL) cap. He repeated his commitment that if an MBL bill gets through the Senate, he will work to get it considered in the House. The National Credit Union Administration (NCUA) Thursday delivered a letter to Senate Majority Leader Harry Reid (D-Nev.) thanking him for efforts to get an MBL cap increase to the Senate floor this year. NCUA Chairman Debbie Matz, in the letter, reiterated her support for the higher MBL authority and reminded Reid that credit union member business lending “has been an important source of credit for American entrepreneurs for over 70 years.”

CFPB may result in some examination changes NCUA says

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ALEXANDRIA, Va. (9/17/10)—While the National Credit Union Administration (NCUA) will retain the majority of its examination authority under the recently enacted Dodd-Frank financial regulatory reform package, the NCUA on Thursday said that it will likely redesign some aspects of its examination process to better interact with the still pending Consumer Financial Protection Bureau (CFPB). Specifically, the NCUA will retain examination authority for credit unions with under $10 billion in assets. NCUA was briefed on how the Dodd-Frank legislation and, more specifically, the CFPB will impact its practices going forward. The CFPB will be tasked with, among other things, monitoring the financial system for systemic risk. NCUA Chairman Debbie Matz during the agency's Thursday open board meeting said that the regulation and monitoring of systemic risk is “critical.” The CFPB will likely not be up and running for another 6 months to a year. The Office of Financial Research, which will monitor the markets for evidence of systemic risk trends, will work with NCUA and other regulators as it establishes its own guidelines. NCUA officials on Thursday said that NCUA may need to alter some of its own data collection practices to work more closely with the to-be-established office. However, the NCUA should not be subject to the OFR requirements for up to three years. NCUA’s data collection processes could also be impacted by its participation in the national foreclosure database, another program that will be established under the Dodd-Frank legislation.

FHFA GSE reform needs careful consideration

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WASHINGTON (9/16/10)--Federal Housing Finance Authority (FHFA) Acting Director Edward DeMarco on Wednesday called for “careful consideration” of how mortgage subsidies are distributed in any future nationwide housing finance system. Speaking during a House Financial Services capital markets subcommittee hearing on the future of housing finance, DeMarco generally agreed that legislation to “restructure and strengthen” the existing housing finance system and to resolve the dual conservatorships of Fannie Mae and Freddie Mac is needed. DeMarco added that it is “reasonable to question whether all conventional mortgages warrant a government guarantee.” “To put it simply, replacing the (government-sponsored enterprises’) implicit guarantee with an explicit one does not resolve all the shortcomings and inherent conflicts in that model, and it may produce its own problems,” he said. DeMarco added that providing an explicit federal guarantee on mortgages could potentially distort the pricing of credit risk or result in taxpayers again being called on to bail out Fannie and Freddie. Panelists speaking at a U.S. Treasury Department meeting on the housing finance system held earlier this year suggested a number of options, including providing limited guarantees for only certain types of mortgages and securities and bringing the entire housing finance industry under the control of a single government agency. Treasury Secretary Tim Geithner during that meeting also called for a new system that eliminates the conflict between Freddie Mac's and Fannie Mae's public policy role and the need to enhance shareholder returns. Going forward, DeMarco said that Fannie and Freddie should “maintain their focus on mitigating credit losses and remediating internal operational weaknesses while employing prudent underwriting standards and guaranteeing proven mortgage products.” Developing and offering new products should be tabled for the time being, he added. For DeMarco’s full testimony, use the resource link.

CUs look forward to future campaign chances

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WASHINGTON (9/16/10)—Though the narrow primary loss of potential New Hampshire Senate seat nominee and former credit union chairman Ovide Lamontagne is a disappointment, Credit Union National Association (CUNA) Senior Vice President of Political Affairs Richard Gose said that CUNA “look(s) forward to finding similar opportunities with other candidates in the future.” Lamontagne, who led St. Mary's Bank, the nation’s oldest credit union, fell 1,600 votes short of Republican primary opponent and former New Hampshire state Attorney General Kelly Ayotte. “As a former chairman of a credit union, he was committed to credit unions and their needs; we are committed to helping those who understand and commit themselves to credit unions,” Gose added. The Credit Union Legislative Action Council (CULAC) contributed $5,000 to Lamontagne’s campaign and ran a series of statewide radio ads supporting Lamontagne as the election came to a close. Credit union-backed candidates came out on top in several other electoral contests. Former District of Columbia city councilman Vincent Gray, who was backed by the Maryland and District of Columbia Credit Union Association, defeated incumbent Adrian Fenty for the Democratic mayoral nomination. Julie Lassa (D) and Carolyn Maloney (D), who also had credit union backing, won their respective primary contests in Wisconsin and New York.

House revising CRA hearing set for Sept. 21

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WASHINGTON (9/16/10)—The House Financial Services Committee on Wednesday announced that a hearing on potential revisions to the Community Reinvestment Act (CRA) will be held on Sept. 21. A witness list had not been released at press time. Federal Reserve Governor Elizabeth Duke earlier this year called for a comprehensive CRA update, and panelists at a Fed-sponsored discussion also recommended that CRA be broadened and applied to credit unions. The panelists also called for enhanced enforcement of CRA rules. CRA was enacted in 1977 in response to a practice known as "redlining," which refers to the failure to lend to lower-income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose of the law is to ensure that for-profit financial institutions adequately meet the financial service needs of all parts of the communities from which they draw deposits. The Credit Union National Association (CUNA) opposes any effort to include credit unions under CRA requirements, and has argued that credit unions already meet and exceed the intent behind CRA due to their localized scope and membership requirements.

Inside Washington (09/15/2010)

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* WASHINGTON (9/16/10)--Banks need to better align their capital cushions with commercial real estate concentrations, and auditors should have a smaller role in setting loan-loss reserves, said Tim Long, certified national bank examiner. Long spoke Tuesday to the American Institute of Certified Public Accountants (American Banker Sept. 15). As banks’ concentrations increase, so should the buffer above regulatory capital minimums, which would provide more transparency, he said. Banks also should focus more on their own credit analysis than accountants’ advice when determining the proper amount of loss reserves. Some accountants didn’t recognize the risk leading up to the financial crisis, he added ... * WASHINGTON (9/16/10)--Senate Democrats support appointing Elizabeth Warren as interim head of the Consumer Financial Protection Bureau, but Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said the move would be a mistake. Dodd joins Republicans in saying that the appointment should be handled through the traditional Senate confirmation process--requiring at least 60 votes to block a filibuster. Dodd said he does not favor recess appointments and appointing Warren as interim head could set a poor precedent for future administrations (American Banker Sept. 15). Warren chaired the Congressional Oversight Panel and is a professor at Harvard University. When news broke that her classes at Harvard were cancelled, and that she had met with President Barack Obama in Washington, D.C., last week, financial observers began to speculate whether she would be appointed head of the bureau, which was created under the Dodd-Frank Act ... * WASHINGTON (9/16/10)--The Federal Deposit Insurance Corp. has issued guidance regarding the risks posed by sensitive information stored on certain electronic devices and how financial institutions should mitigate risks. Financial institutions should implement written policies to ensure a hard drive or flash memory with sensitive information is erased, encrypted or destroyed prior to returning to the leasing company, sold or disposed of, the letter said ...

NCUA takes on assessment financial reforms today

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WASHINGTON (9/16/10)—Discussion of the National Credit Union Share Insurance Fund (NCUSIF) premium, which will help replenish the equity level of the NCUSIF, will be one of many highlights of today’s National Credit Union Administration (NCUA) board meeting, the first to take place since July. The Credit Union National Association (CUNA) has projected that the NCUA will charge a premium of between six and 10 basis points. The recently enacted Dodd-Frank financial regulatory reform legislation will be another topic of discussion. CUNA has estimated that around 35 of the new regulations would impact credit unions, with specific changes to interchange fees and related issues being the most notable additions. Other areas specifically impacting credit unions include changes to mortgage lending rules as well as other rules that will be issued by the new Consumer Financial Protection Bureau. CUNA has said that a number of changes would likely only alter existing regulations. Final rules addressing secondary capital accounts and short-term, small amount (STS) loans are also on the docket. The NCUA earlier this year proposed allowing federal credit unions to offer STS loans as a better alternative to predatory payday loans that are offered by other financial service providers. Under this proposal, federal credit unions would be permitted to charge an interest rate that is higher than the current usury ceiling in the Federal Credit Union Act, but the rule would impose limitations on the permissible term, amount, and fees for these types of loans. The Credit Union National Association supports the STS plan, but has urged the NCUA to make sure the rule is not so prescriptive as to discourage credit union participation. Potential adoption of the Federal Accounting Standards Advisory Board's financial reporting standards and the general status of the NCUA's insurance funds also will be discussed during the open portion of the meeting. For the full NCUA agenda, use the resource link.

CU among six iGo Directi Champions

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WASHINGTON (9/16/10)--State Employees' CU, Raleigh, N.C., was among six financial institutions named by the U.S. Treasury Department as 2010 Go Direct Champions for their roles in driving enrollments in direct deposit among federal benefit-check recipients. The six champions beat out 13 other competitors. Participating credit unions and banks were grouped into two tiers based on number of branches, and the program tracked increases in the financial institutions' Social Security and Supplemental Security Income (SSI) ACH payments over an eight-month period, ending May 31. This recognition program is aimed at financial institutions with a minimum of 100 branches. The Go Direct campaign has helped more than four million Social Security and other federal benefit check recipients switch to direct deposit since its launch in 2005. The Credit Union National Association is a Go Direct national partner. The Treasury’s Go Direct campaign also has a recognition program, called the Community Ambassadors, aimed at small- and medium-sized financial institutions.

Inside Washington (09/14/2010)

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* WASHINGTON (9/15/10)--Nonbanks would be exempt from regulations proposed by the European Commission that would require financial institutions to route much of their trades through clearing houses, said Dow Jones (Sept. 14). The draft legislation, expected to be published today, would exempt the nonbanks if their trades do not pose systemic risk. The European Securities and Markets Authority and the European Commission will set the exemption’s threshold ... * WASHINGTON (9/15/10)--Arthur Lindo, chief accountant at the Federal Reserve, sought to relieve financial industry concerns that regulatory reform would lead to an excess of regulatory supervisors (Dow Jones Sept. 14). The Fed will attempt to coordinate activity with other agencies better than it has in the past, Lindo said at a conference in Washington, D.C. The Dodd-Frank Act would incorporate thrift holding companies into the Fed’s supervisory process. It also will supervise nonbank financial companies that are deemed systemically significant. Lindo said the Fed already has created a “cross disciplinary” team to monitor the institutions ...

Hyland urges due diligence diversity at CUs

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OXFORD, Ohio (9/15/10)--Speaking on Tuesday, National Credit Union Administration (NCUA) Board Member Gigi Hyland urged credit unions to continue their due diligence efforts and “actively monitor” their loan portfolios and collection efforts. Hyland, speaking before the seventh mid-sized credit union CEO conference, said that “the marketplace is still immensely challenging,” and credit unions need to keep their “proverbial ear to the ground” to assure that they are “responding to members' needs while executing sound, timely risk management practices.” Credit unions should also take a “fresh view” toward all of their business practices, including how member needs are addressed and how risk management is handled. Additionally, credit unions should examine their investments to ensure that the appropriate asset liability management triggers and controls are in place. Hyland noted that credit unions should be aware that the number of credit union members that declare bankruptcies in 2010 will likely exceed the prior year’s total, and credit union earnings have “reflected members’ struggles.” Hyland said that credit unions’ overall return on average assets (ROA) dropped to 0.41% during the second quarter, down from the 0.47% ROA recorded during the previous quarter. Still, credit unions’ aggregate net worth ratio “held steady” at 9.9%, she said. Hyland also called on credit unions to “explore new avenues to serve everyone within their field(s) of membership” and to assure that their “board, management and staff are as diverse, in age, gender and ethnicity,” as their membership. For the NCUA release, use the resource link.

CUNA strategists plot new course for MBLs

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WASHINGTON (9/15/10)--With the Senate on Tuesday failing to add legislation that would lift the member business lending (MBL) cap to a small business job creation package, Credit Union National Association (CUNA) President/CEO Bill Cheney said that credit unions “can and should continue to push” for lifting the cap in this and future legislative sessions. The small business job creation package, which, among other things, would create a $30 billion fund to encourage small banks to lend to businesses, will likely come up for a full Senate vote by the end of this week. Cheney said that CUNA will seek another legislative vehicle for an MBL amendment “or consider building support to move it as a stand-alone bill.” “In any event--we believe there may still be a chance for action, perhaps in a 'lame duck' session after the election,” Cheney added. Cheney and other CUNA representatives met with senior White House officials late last week to discuss the MBL issue. During that meeting, Cheney noted that America's 7,800 credit unions would “find it hard to understand" how the U.S. Congress could approve a $30 billion taxpayer expense to bolster flagging bank lending, but not let credit unions step in to help increase credit flow and job opportunities at no cost to the government. The Senate MBL legislation, which was introduced by Mark Udall (D-Colo.) earlier this year, would lift the current 12.25% cap on member business lending to 27.5% of a credit union’s assets. The MBL legislation, which has been supported by several in the House and Senate, as well as the Obama administration, would inject over $10 billion into the economy and create more than 100,000 new jobs in the first year following enactment.

FHFA compares credit quality at GSEs private entities

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WASHINGTON (9/15/10)--The Federal Housing Finance Agency (FHFA) released data on Fannie Mae and Freddie Mac that favorably compares the credit quality and performance of the loans they acquired to loans financed with “private-label” mortgage-backed securities (MBS). The data revealed that while 5% of fixed-rate and 10% of adjustable-rate mortgages acquired by Fannie and Freddie exceeded 90 days of delinquency, roughly 20% of fixed-rate mortgages and 30% of adjustable-rate mortgages financed by private labels were over 90-days delinquent. The FHFA found that 84% of the single-family mortgages acquired by Fannie and Freddie between 2001 and 2008 were made to borrowers with credit scores above 660, while 47% of loans made to MBSs were above that level. Loan-to-Value (LTV) ratios were 80% or lower for 82% of the loans acquired by Fannie and Freddie, while 66% of the loans financed by MBSs had ratios at or below that level. “A pattern of decreasing LTV ratios over time, most pronounced for loans financed with private-label MBSs, is consistent with the greater use of second liens to avoid mortgage insurance on low-down-payment mortgages, a practice that was increasingly common into 2007 and that contributed to the unusually poor performance of loans with low LTV ratios relative to past experience,” the FHFA added. For the full FHFA release, use the resource link.

Inside Washington (09/13/2010)

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* WASHINGTON (9/14/10)--The Obama administration will likely announce a nominee to head the Consumer Financial Protection Bureau soon, President Barack Obama said Friday during a news conference (American Banker Sept. 13). He noted the top candidate for the position, Elizabeth Warren, is a close friend. Consumer advocates have supported Warren to head the bureau. Warren, who chairs the Congressional Oversight Panel, recently cancelled classes she teaches at Harvard University. The cancellation, and a meeting she had with the president in Washington, D.C., last week, triggered rumors about the possibility of her heading the bureau ... * WASHINGTON (9/14/10)--Higher capital standards aren’t enough to fix structural problems in the financial industry, according to Paul Volcker, former Federal Reserve Board chairman. When a bank “goes bad,” it doesn’t matter how much capital it has, Volcker said during an economic roundtable in Calgary, Alberta. The problem of “too big to fail” has not been solved, and there should be some rules that maintain separation between the central bank and trading activity, he added. The Volcker Rule, named after Volcker, was included in financial regulatory reform and aims to limit commercial banks’ ability to engage in proprietary trading (American Banker Sept. 13) ... * WASHINGTON (9/14/10)--The Office of Financial Research (OFR), created under the regulatory reform bill, will collect data for the Financial Stability Oversight Board to identify risks to the financial system. Observers told American Banker (Sept. 13) the office will likely encounter some challenges, such as deciding who to target, how much information will be collected and how to analyze the data. Too much data could overwhelm regulators, observers said. Sifting through the data could be tough, said Phil Swagel, professor at Georgetown University and former Treasury economist. Andrew Freeman, executive director of the Deloitte Center for Financial Services, said the OFR could be a “game-changer” because it could help policymakers make more informed decisions ...

NCUA closes merges P.R.-based 3.6M asset FCU

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ALEXANDRIA, Va. (9/14/10)–-The National Credit Union Administration (NCUA) on Monday approved the liquidation of the $3.6 million asset, 1,956 member Industries Puerto Rico FCU. The credit union, which was based in Manati, P.R., was then purchased by $16.3 million asset Borinquen Community FCU. In a release, NCUA said that Industries Puerto Rico’s worsening financial condition resulted in its liquidation. Industries Puerto Rico FCU is the 15th federally insured credit union to be liquidated this year. NCUA recently said that it would look for ways to improve the overall merger process. It told the Credit Union National Association that it would release a national merger registry, which would provide the names of potential credit union merger partners, in October. For the full NCUA release, use the resource link.

More on SAFE Compliance Sample policy

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WASHINGTON (9/14/10)--The Credit Union National Association (CUNA), in response to inquiries, has written a sample policy that credit unions may find useful to review in developing their own Safe and Fair Enforcement for Mortgage Licensing Act (SAFE) policy that must be adopted by Oct. 1. “Credit unions are concerned about how to devise a policy to comply with the SAFE regulations when they are uncertain about all the actual registration requirements,” said Valerie Moss, CUNA’s director of compliance information. “CUNA has put together a sample drawn from the regulatory requirements and definitions. As the National Credit Union Administration admitted in a recent Letter to Credit Unions on SAFE (No. 10-CU-13), a credit union is going to have to revisit whatever SAFE policy it adopts and develop its actual procedures once the registration procedures are announced by the Conference of State Bank Supervisors (CSBS), which is in charge of developing the national registry,” she added. “Besides requests for a sample policy, we’ve received a number of questions on who is actually required to do the background check,” Moss noted. “The CSBS told us last week that it will be a ‘fingerprint-based criminal background check.’ The employee required to register will be directed to local offices where fingerprints will be taken in order to maintain a secured process. The registry’s network, not the credit union, will conduct the background check based on the fingerprints.” CSBS told CUNA last week that 95% of the fingerprints taken in its current licensing system have been digital, which provides greater accuracy with a quick turnaround time. Credit unions should generally expect to receive the background report within 24 hours, unless there are problems with the quality of the fingerprints, which of course will delay the ability to get the individual employee registered. As reported yesterday, credit unions will be charged a fee, yet to be announced, for the background check. Use the resource links below.

CUNA backs Treas. core educational concepts

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WASHINGTON (9/14/10)--The Credit Union National Association (CUNA) has come out in support of the U.S. Treasury Financial Literacy and Education Commission's proposed core financial literacy concepts, adding that the concepts the commission has proposed--earning, spending, saving, borrowing, and protecting against risk--are clear, concise, and thorough. The commission’s core concepts provide an excellent foundation “on which to structure financial education,” CUNA added. CUNA also thanked the commission for avoiding references to any specific type of financial institution in its developed financial education core competencies. In addition, CUNA recommended that the commission enhance the list of core concepts by adding information on debt reduction, credit scores, financial planning, and credit rating establishment, among other issues. Though classroom financial education is “crucial,” CUNA said that to create large-scale positive change, “financial education efforts must also focus on other aspects of an individual's daily life—such as education in the workplace.” For the full CUNA letter, use the resource link.

Small biz on agenda as Senate House return

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WASHINGTON (9/14/10)--Small business job creation legislation is high on the list of priorities for the Senate as the U.S. Congress returns to Washington following an extended August break. The small business legislation could come up for a full vote at the end of this week. Amendments will likely be offered today, perhaps including one that would increase the member business lending (MBL) cap and one to repeal some 1099 reporting requirements. Its is not known whether the MBL legislation, which would more than double the current cap imposed on credit unions to 27.5% of total assets, will be added to the final small business legislation. However, Credit Union National Association Senior Vice President of Legislative Affairs John Magill recently said that while the protracted legislative battle over small business legislation has dimmed the overall prospects of that legislation, credit unions have been able to use the process to shine a positive light on the MBL increase proposal. Specifically, CUNA and credit union backers have powerfully made the case for the MBL increase to legislators and the media, and the Obama administration has also come out in favor of lifting the cap. "This is the closest credit unions have ever gotten in their pursuit for increased MBL authority,” Magill added. Also of interest to credit unions is a midweek House Financial Services capital markets subcommittee hearing on "the future of housing finance.” Treasury Assistant Secretary for Financial Institutions Michael Barr and Federal Housing Finance Authority Acting Director Edward DeMarco will testify during the haring, which will focus on government-sponsored entities Fannie Mae and Freddie Mac.

CU tax exemption gets outside support

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WASHINGTON (9/14/10)--Imposing a tax on credit unions “would hurt Americans’ pocketbooks, damage the economy, undermine the social purposes for which credit unions exist, and raise little revenue,” a group of DC-based think tanks said in a letter to the Obama administration. The President's Economic and Recovery Board briefly mentioned taxing credit unions as one of many potential moves to increase government funding. The letter, which was co-signed by representatives from The Heartland Institute, Americans for Tax Reform, and the League of United Latin American Citizens, added that there is “simply no reason” to impose any new taxes on credit unions. While credit unions provide many of the same financial services that banks provide, credit unions are “democratically governed, member-owned cooperatives that serve limited fields of membership and, quite often, provide credit and banking services that would not otherwise be available,” and, thus, are “not the same as banks, ” the letter read. Credit Union National Association President/CEO Bill Cheney late last month directly opposed the notion of taxing credit unions, saying that the $7.5 billion in savings that is gained by consumers far outweighs the estimated $1.5 billion in federal revenue that is lost due to the exemption. "It may be the case that not all tax preferences have lived up to expectations, but the credit union tax exemption is one of the highest-yielding investments the federal government has made," Cheney added.

2010 Hill hikes kick off this week

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WASHINGTON (9/14/10)—Credit union advocates from across the country will meet the returning Congress this week as the Credit Union National Association (CUNA) kicks off the fall 2010 edition of CUNA’s Hike the Hill. The hikes, which will take place until the end of the month, will give credit union representatives from Oregon, Montana, Kentucky, West Virginia, Wisconsin, Massachusetts, New Hampshire, Rhode Island, Illinois, Minnesota, Idaho, and Ohio the chance to advocate on behalf of credit unions. Member business lending, alternative capital, the credit union tax exemption, and other related topics will be on the agenda for these meetings. Hundreds of credit union backers from various state leagues and individual credit unions have already met with congressional representatives during February’s Governmental Affairs Conference and in a pair of subsequent national hikes held later in the year. Credit union backers also met with their respective legislators during in-district work periods. Elizabeth Furey, director of grassroots advocacy for political affairs, said that the hikes are a vital part of CUNA’s credit union advocacy strategy, adding that CUNA, credit unions and the leagues must use every tool available to make their political voices heard.

High school students challenged on fin. ed.

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WASHINGTON (9/14/10)--High school educators have another tool to help with students’ financial education. The Obama administration Monday announced the launch of its National Financial Capability Challenge for the 2010-2011 school year. The Challenge is a voluntary online exam and classroom toolkit that teaches about saving, budgeting, investing, the safe use of credit, and other skills that build a strong basis for financial decisions. In announcing this year’s Challenge, U.S. Treasury Secretary Tim Geithner said financial literacy is not only important to the financial security of American families. "The recent financial crisis taught us an enduring lesson…Ensuring that young people have the skills they need to make wise financial choices today and into adulthood will help us build a stronger foundation for our nation's economic future." In late Fall, educators will be able to download a new "Teacher Toolkit" with ready-to-use lesson plans. The online exam will take place between March 7 and April 8, 2011. Educators and students who score in the top 20% nationally, and those who are among the top scorers in their schools, will receive official award certificates. The administration announcement said it wants to build on last year’s experience--when more than 76,000 students and 2,500 educators in all 50 states participated--and increase that by 15% to 87,000 students and 2,800 educators. Use the resource link for more information.

990 filers CUNA reminds dont lose exemption

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WASHINGTON (9/14/10)--The Credit Union National Association (CUNA) wants to remind state-chartered credit unions of the importance of making very sure that they are filing annually with the Internal Revenue Service (IRS) their Form 990, “Return of Organization Exempt for Income Tax." Tax-exempt organizations that haven’t filed their 990 form for three consecutive years are in danger of losing their federal tax exemption under a provision included in the Pension Protection Act of 2006. State-chartered credit unions are required to file the 990 form annually. The deadline for filing to make sure there isn’t any revocation of income tax-exemption is Oct. 15. Federal credit unions are not required to file the form. The IRS is worried that 300,000 small charities may be caught by this new law, and has a new "toolkit" on its website that includes a list of organizations that have failed to file their forms for the last three years. The toolkit includes answers to frequently asked questions about revocation and reinstatement. “Although the IRS is focusing on small charitable organizations that may have overlooked their reporting responsibilities, CUNA is concerned that there may be a handful of credit unions that didn’t realize that their own state regulator discontinued filing a group 990 form in recent years and failed to start filing the annual tax return themselves,” said Kathy Thompson, CUNA’s senior vice president for compliance. “There are a few states still filing a group 990, so if you have any question about this, you should contact your league or state regulator.” Thompson said that the IRS list includes names of some credit unions that she recognizes have merged in recent years and has “some strange listings” that include “credit union” in the name. She reports that a number of leagues have gone through the IRS list and contacted a few credit unions in their states to make sure there hasn’t been an oversight in filing. “But ultimately the responsibility rests with the state-chartered credit union to protect its federal tax exemption by making sure there hasn’t been any gap in 990 filings,” stressed Thompson. User the link below for the IRS toolkit explaining the 990 filing requirement and the special relief that the IRS is offering to small organizations this fall. The toolkit includes a section of what the credit union should do if it thinks the IRS records are wrong.

CUNA What Basel III could mean to CUs

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WASHINGTON (9/14/10)--As global bank regulators, including those in the U.S., reached a Basel III agreement over the weekend on broad reforms that will make banks hold more capital as a buffer against future financial shocks, credit unions may wonder how the accord’s ripples may affect them. The international bank rules, which create a new leverage ratio for banks with a 7% requirement, of course, do not apply to credit unions. However, as domestic bank regulators begin to discuss these new capital standards for banks, that discussion could provide a new backdrop for and focus on a conversation about alternative capital for credit unions. “The good part is the 7% capital ratio for banks would now be the same as the credit union requirement, and we should be able to use that to support the case for letting credit unions count more than just retained earnings as capital,” said Credit Union National Association (CUNA) Chief Economist Bill Hampel Monday. U.S. credit unions--excluding those with low-income designation--are among the only financial institutions in the world lacking access to capital beyond retained earnings. And fallout from the country’s economic crisis has underscored the importance of investigating alternatives. “In a low-earning environment, retained earnings is a painfully slow way to build needed capital,” Hampel noted. Gaining access to sources of alternative capital would require congressional action, so if the Basel III agreement helps turn federal regulators’ and lawmakers’ attention to the topic of financial institution capital, it might help ramp up the volume of credit union arguments for the need for alternatives, Hampel noted. The National Credit Union Administration issued a supplemental capital white paper in April that outlined three models for alternative capital: voluntary patronage capital, mandatory membership capital, and subordinated debt. Use the resource link for more information.

Compliance A SAFE registration update

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WASHINGTON (9/13/10)--The Conference of State Bank Supervisors (CSBS) briefed the Credit Union National Association (CUNA) and other trade associations last week about its progress on developing the registration process that banks, credit unions, and their employees will have to follow in order to comply with the Safe and Fair Enforcement for Mortgage Licensing Act (SAFE Act). All credit unions that make residential mortgage loans are subject to the National Credit Union Administration’s (NCUA’s) SAFE regulations and may have to register certain employees. NCUA, the federal banking agencies and the Farm Credit Administration are working with CSBS, which already runs the web-based registration system for state licensing of mortgage loan originators, to modify the current CSBS system to create the Nationwide Mortgage Licensing System and Registry. When the final SAFE regulations were issued in July, the agencies indicated they expect the Registry to be operational on January 28, 2011. The law provides that credit union employees who are “mortgage loan originators” (MLOs) as defined by the SAFE regulations and approve a certain number of mortgage loans a year will have 180 days after the agencies formally announce the date that the registry is operational to become registered in order to continue to be authorized to make residential mortgage loans, including home equity loans. Registration requires that MLOs provide certain information, including employment history, and provide finger prints for a criminal background check. Some of this information, including the unique identifying number assigned by the registry to the individual, will be publicly available. All of the information will be made available to the federal agencies. Although the registration procedures are not finalized, CSBS provided CUNA with an overview of how the electronic registration system will work. Each credit union will have to have a “research statistics supervision discount” (RSSD) number, which is assigned by the Federal Reserve Board, in order to initially access the Registry to register the credit union itself into the system. On its “SAFE Act” webpage, NCUA has a link to “Finding Your Credit Union’s RSSD Number.” CUNA isn’t sure how many credit unions lack a RSSD number and will explore what has to be done to have this number assigned. The registry will then provide each credit union with a number to be used for all future SAFE purposes. The credit union will complete a “MU1R” form for registering the credit union, which will include a name of an employee to contact for questions, who can be the same person designated as the account administrator. The account administrator will have full access to all the information provided by the credit union and its MLO employees. The credit union has to be registered before individual MLO employees can register. Individuals will do so by completing the “MU4R” form. Employees will have to attest to the accuracy of the information they provide, and the credit union will have to indicate that it has received the criminal background check information before finally completing the registration process. CSBS indicated that it hopes to post these forms to its website in the next week or so, which will allow everyone to understand what information will have to be provided even though actual registration is months away. CSBS described that it will have a “MLO batch upload process,” which will allow the credit union to manage the registration process of its employees. CUNA’s Senior Vice President for Compliance Kathy Thompson noted that although the batch upload process will not be required, CSBS said that it would recommend financial institutions use the batch upload process. “Undoubtedly credit unions will want to use this batch process in order to track that designated employees are actually registering, and employees will want the credit union to centralize the process so that the credit union, rather than the employee, pays the registration fees,” Thompson added. CSBS says it hopes to have the batch upload specifications released at the same time the forms are available in coming weeks. CSBS is required to seek public comment on the fees it’s proposing for SAFE registration, and CSBS said at the meeting that it expects to do so in the next two to three weeks. It would not provide even a range of what the cost might be, but said there will be fees for the actual registration process, fees for conducting the criminal background check, and a security fee required to protect the system. Starting in November, CSBS plans to provide training materials and webinars to help prepare credit unions and banks on how to register. It also noted that it has an experienced call center, which already provides technological support to the state licensing programs. It emphasized that the federal agencies, not its call center, have to address such questions on who has to register and other issues related to interpreting the regulations. CSBS has a page on its “NMLS Resource Center” website which provides public information about the federal registration process, which is where it will post the forms and answer frequently asked questions. CSBS says this page will serve as the gateway into the registration system. In addition to its regular meetings with the federal agencies, which determine what the registration system will require, CSBS has organized an informal working group of some credit union and bank loan officers to discuss implementation issues and training needs as it finalizes the SAFE registration program. It plans to meet with this group throughout the fall. As a reminder, the SAFE regulations are effective Oct. 1, 2010, even though the registration process won’t begin for another four months. “The regulations require credit unions to adopt a general SAFE policy in the next few weeks,” Thompson emphasizes, “although NCUA acknowledges the credit union’s policy will need to be reviewed, and possibly revised, once the registration procedures are announced.” Thompson said that credit unions should also begin the process of identifying which credit union employees will have to be registered. While credit unions and their employees will be given 180 days to register starting in late January, Thompson said that they should not wait until the beginning of next summer to focus on registration. "You don't want to find you have technological glitches, problems with fingerprints, or delays in receiving the background checks, and suddenly your credit union can't make a mortgage loan in mid-summer because staff isn't SAFE-ly registered." For more CSBS information, use the resource link.

CUNA meets White House officials on MBL urgency

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WASHINGTON (9/13/10)--Senior White House officials and top representatives of the Credit Union National Association (CUNA) met Friday as CUNA again urged the administration to increase its efforts in support of a higher member business lending (MBL) cap as it promotes ideas to help small businesses. CUNA President/CEO Bill Cheney underscored that by taking his bill-signing pen to legislation to increase the statutory MBL cap, the President could help infuse $10 billion of new credit into small businesses and create more than 108,000 new jobs--at no cost to the American taxpayer. The U.S. Senate is scheduled to take up a pending small business jobs bill at 11:00 a.m. (ET) tomorrow, and Sen. Mark Udall (D-Colo.) has drafted a possible amendment that would increase the MBL cap to 27.5% of a credit union’s total assets, up from the current 12.25% limit. CUNA, the state credit union leagues and credit unions have been working feverishly to urge senators to vote in favor of the amendment as they continue consideration of the jobs bill. Within that bill is a $30 billion taxpayer-funded program to encourage community banks to do more lending to the nation’s small businesses. Cheney noted to the White House officials that, absent the Udall amendment, America's 7,800 credit unions “will find it hard to understand” how the U.S. Congress could approve a $30 billion taxpayer expense to bolster flagging bank lending, but not let credit unions step in to help increase credit flow and job opportunities at no cost to the government. CUNA General Counsel Eric Richard, who also participated in the White House meeting, noted, “We stressed the urgency of quick action by the White House in support of this amendment” because of the quickly approaching vote. CUNA Deputy General Counsel Mary Dunn and Senior Economist Bill Hampel also attended the meeting. In a letter to Obama earlier this month, CUNA applauded the administration for its commitment to small business, and reminded the administration that U.S. Treasury Secretary Timothy Geithner earlier this year publicly backed lifting the MBL cap in a letter to Congress. Geithner also encouraged the administration to include MBL language in future economics-oriented legislative packages.

Inside Washington (09/10/2010)

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* WASHINGTON (9/13/10)--With both houses of the U.S. Congress scheduled to return to session this week, talk already has turned to abbreviating the new session from four weeks to three. CongressDaily reported Friday that House Democrats are considering adjourning at the end of this month, a move that would give House members more than a month to focus on their campaigns prior to the Nov. 2 elections. However, the article stressed that so far the early release date is just talk and that the official adjournment date stays set at Oct. 8 … * WASHINGTON (9/13/10)--About half of Americans who claimed the first-time homebuyer tax credit on their 2009 returns will need to repay the government, said CNNMoney.com (Sept. 9). Roughly 950,000 of the 1.8 million Americans who claimed the credit will have to give back their money due to some confusion about which tax credits homebuyers were eligible for. Those who purchased homes during 2008 were supposed to deduct 10% of the home’s purchase price or $7,500, whichever was less. The money then would have to be repaid in 15 years with no interested. Congress in 2009 extended the loan into a refund. The Internal Revenue Service (IRS) is creating a strategy to separate the 2009 taxpayers who are required to repay the credit from those who are not. A report from the Inspector General earlier this year indicated the IRS could not tell between home purchases made in 2008 and 2009, which triggered concerns that some claims could be in error. About 73,000 claims had incorrect purchase dates ... * WASHINGTON (9/13/10)--The U.S. Treasury Department has received roughly $16 billion in dividends and interest regarding its investments in banks and others through the Troubled Asset Relief Program (TARP). Payments totaling $666 million have been made since August. Half of the money came from banks in the capital purchase program. Investments in automakers General Motors Co., Chrysler Group and others have garnered $2.6 billion. The Treasury also is earning about $411 million in interest from its asset guarantee program, and about $140 million in dividends in the Public-Private Investment Program. About 97 banks are behind on payments, with a backlog of $45 million, said Bloomberg (Sept. 9) ...

FHFA reports rise in home loan mods refinancings

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WASHINGTON (9/13/10)--The number of home loan modifications and refinancings executed by Fannie Mae and Freddie Mac increased during the second quarter of 2010, the Federal Housing Finance Agency (FHFA) said in a Friday release. The FHFA said that the number of permanent modifications under the Obama Administration’s Home Affordable Modification Program (HAMP) also increased by 65%. Over half of these modifications lowered homeowners’ monthly payments by at least 30%, the FHFA said. The FHFA also noted that the overall performance of modified loans has increased over the last two quarters, with fewer than 10% of those loans falling into delinquency. The number of refinancings executed under the Administration’s Home Affordable Refinance Program (HARP) also rose by 30% during the quarter. A total of 1,013,700 “foreclosure prevention actions” have been undertaken since Fannie and Freddie were taken under government conservatorship in late 2008, the FHFA said. Freddie Mac also reported the results of its most recent weekly mortgage survey on Friday, with that survey revealing an increase in overall 30-year mortgage rates for the first time in weeks. Both 30- and 15-year mortgage rates had been at record lows for several consecutive weeks. The 15-year mortgage rates remained at 3.83%, identical to the rate reported as of Sept. 2, and still at a record low level. For the FHFA and Freddie Mac releases, use the resource links.

Go Direct Crime prevention can include direct deposits

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WASHINGTON (9/13/10)--The U.S. Treasury Department's direct deposit program, Go Direct, is encouraging credit unions and other financial institutions to use October’s Crime Prevention Month to promote the use of electronic payment systems. Go Direct in a Friday release said that “too many senior citizens, people with disabilities and other federal benefit recipients still receive their payments by paper check, putting their money and themselves at risk of check theft and other financial crimes.” By receiving their payments electronically, individuals can avoid having their money stolen “are better protected against financial crimes,” Go Direct added. Go Direct is providing financial institutions and community organizations with newsletter copy, news briefs, and brief tips to spread the financial crime prevention message. The Credit Union National Association is a national partner of the Go Direct program, which was founded in 2004 and encourages Americans to switch to direct deposit. For the full Go Direct release, use the resource link.

Fed releases HMDA hearing agenda

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WASHINGTON (9/10/10)--The Federal Reserve Board has released its official agenda for the Sept. 16 hearing on the Home Mortgage Disclosure Act (HMDA). As previously reported in News Now, University of Wisconsin CU Chief Credit Officer Mike Long will be among those testifying at the hearing. The hearing will also feature testimony from Illinois Senior Assistant Attorney General Thomas James and University of Wisconsin--Madison consumer science professor J. Michael Collins, among others. Fed Governor Elizabeth Duke will also be in attendance. The Sept. 16 hearing is based in Chicago, and follows recent hearings in Atlanta and San Francisco. A fourth hearing will be held on Sept. 24 in Washington, D.C. The hearings are meant to help the Fed assess the need for additional data and improvements, to identify emerging mortgage market issues, and to evaluate whether the 2002 revisions to Regulation C, which required lenders to report mortgage pricing data, helped provide useful and accurate information about the mortgage market. For the full hearing agenda, use the resource link.

CUNA nominates pair for Fed consumer council

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WASHINGTON (9/10/10)--The Credit Union National Association (CUNA) has nominated UW CU Chief Credit Officer Mike Long to serve on the Federal Reserve’s Consumer Advisory Council (CAC). Long is also testifying at a Fed Home Mortgage Disclosure Act hearing on Sept. 16. (See related story: Fed releases HMDA hearing agenda) CUNA has also re-nominated Alan Cameron, president/CEO of the Idaho Credit Union League, to continue serving on the council. Cameron’s current term runs through 2010. The CAC, which is composed of 30 members that serve three-year terms, advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. The group meets three times a year in Washington, D.C. and meetings are open to the public. The group discussed loss-mitigation efforts, the Administration's Making Home Affordable program, neighborhood stabilization initiatives and challenges, and other issues related to foreclosures during its last meeting, which took place on June 17.

Corp. CU legacy assets rules now in near future

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ALEXANDRIA, Va. (9/10/10)--While the National Credit Union Administration (NCUA) has long hinted that new corporate credit union rules and legacy assets proposals would be released at the Sept. 16 open meeting, the NCUA on Thursday said that those matters would be considered at a later date. The NCUA recently told Credit Union National Association (CUNA) staff that greater work is needed before the corporate credit union and legacy asset issues are ready to be released. With the corporate and legacy asset issues absent from the agenda, the main issue of concern to credit unions will likely be the establishment of the National Credit Union Share Insurance Fund (NCUSIF) premium. The NCUA is levying the assessment to rebuild the equity level of the NCUSIF, which was depleted due to multiple credit union failures. CUNA has projected that the NCUA will charge a premium of between 6 and 10 basis points. The general status of the NCUA’s insurance funds will also be discussed during the meeting. The NCUA on Thursday also said it would discuss secondary capital accounts, short-term, small amount loans, and the adoption the Federal Accounting Standards Advisory Board’s (FASAB) financial reporting standards during the open meeting. Implementation of the recently enacted financial regulatory reforms will also be discussed, and the NCUA’s monthly report on the state of its according to the NCUA release. Delegations of authority as well as supervisory activities will be discussed by the board during the closed portion of the meeting. For the full NCUA agenda, use the resource link.

Inside Washington (09/09/2010)

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* WASHINGTON (9/10/10)--Elizabeth Warren had a meeting with President Barack Obama on Tuesday, possibly regarding a role to lead the new Bureau of Consumer Financial Protection (The Washington Post Sept. 8). Warren was not expected to be in Washington, D.C. until later this morn, when the Congressional Oversight Panel plans to release a report on the government’s $700 billion bailout fund. A White House official confirmed Warren visited the White House Tuesday but did not say why she was there ... * WASHINGTON (9/10/10)--Federal Deposit Insurance Corp. Chairman Sheila Bair said that regulators should be concerned about the risk of exposure the government is taking on in the mortgage market. There should be stricter underwriting standards, and “we can do a better job of having consistent, strong lending standards” for banks and nonbanks, she said. Fannie Mae and Freddie Mac back about 90% of new U.S. mortgages. Treasury Secretary Timothy Geithner has said the government’s role in housing should undergo a fundamental change but that it should also provide some backing in the mortgage market (Reuters Sept. 9) ... * WASHINGTON (9/10/10)—The House Financial Services Committee has announced a Sept. 15 hearing on the future and the progress of government-sponsored housing agencies Fannie Mae and Freddie Mac. Rep. Barney Frank (D-Mass.), who leads the committee, and Paul Kanjorski (D-Penn.) in July announced a slate of housing finance hearings set for September. The U.S. Treasury and the Department of Housing and Urban Development held a panel discussion on housing finance reform and its impact on the financial markets and housing policy in mid-August, and the Obama administration is planning to provide its own housing finance reform proposal to Congress in early 2011… * WASHINGTON (9/10/10)--The Senate Banking Committee will be much different next year, as chairman Christopher Dodd (D-Conn.) and four other members are set to leave at the end of this Congress. Sens. Evan Bayh (D-Ind.), Jim Bunning (R-Ken.) and Judd Gregg (R-N.H.) are retiring. Sen. Robert Bennett (R-Utah) also is not returning after losing his primary race. Some financial industry representatives anticipate the committee may be more moderate in the next two years, said American Banker (Sept. 9), whether or not Republicans take control of the Senate in the November elections ...

CUNA Drop indemnification golden parachute proposals

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WASHINGTON (9/9/10)--The Credit Union National Association (CUNA) has urged the National Credit Union Administration (NCUA) not to proceed with proposed changes that would limit or generally prohibit golden parachute and indemnification payments to officials of federally insured credit unions, including natural person and corporate credit unions. CUNA's comments were developed with CUNA's Federal Credit Union Subcommittee, which is chaired by Truliant FCU President/CEO Marc Schaefer. CUNA’s comments are in response to a recent NCUA proposal that would generally not allow federally insured credit unions, regardless of their financial condition, to make payments to an institution-affiliated party (IAP) to compensate them for any legal costs they have incurred in connection with administrative or legal proceedings by NCUA or a state regulator if the IAP was assessed a money penalty, removed from office, or the subject of a cease and desist order. The prohibition would not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements, and would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. While CUNA supported efforts to contain costs to the National Credit Union Share Insurance Fund, the agency's rationale for issuing the proposal, CUNA's Deputy General Counsel Mary Dunn said CUNA is “generally concerned that the scope of the proposal is too far-reaching and will have a chilling affect on the ability of credit unions to attract management personnel and board members.” The NCUA’s proposals also give the NCUA a “greater role for the agency in the regulation of corporate governance issues than it currently assumes.” Dunn raised concerns that the supplementary information accompanying the proposal provides little justification for it and reiterated general credit union concerns that the NCUA has “crafted a proposal for all federally insured credit unions that is based on its concerns regarding problems experienced by a limited number of corporate credit unions.” She also questioned the need for the short, thirty day comment period for the proposal. CUNA also raised concerns about NCUA’s proposed prohibition of so-called "golden parachute" compensation packages to the departing executives of troubled federally insured credit unions. The so-called “golden parachute” payments addressed by the proposal should also “be permissible to former officials of credit unions in conservatorship, CAMEL 4 or 5 credit unions or those in troubled condition situations in which the official receiving the payment was not involved in causing the loss,” CUNA added. "CUNA cannot support proposals that do not provide proper safeguards for credit union officials who strive to fulfill their duties and serve their credit unions well," Dunn stated. The letter urges NCUA, if it believes the rule is in the best interest of credit unions, to make important changes and allow credit unions to comment again before the rule is adopted. For the full comment letter, use the resource link.

MBL fight goes interactive

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WASHINGTON (9/9/10)--With grassroots member business lending activism in full swing ahead of the U.S. Congress’s pending return to Washington, the Credit Union National Association (CUNA) has again taken the fight for increased MBL cap to the internet.
CUNA will use the geographically-targeted, web-based ads to drive traffic to its own MBL direct advocacy page. That page will put readers in touch with the resources needed to directly express their support for MBL legislation to their legislators. One of the many sites that the ads will appear on is the political news site dailycaller.com, which also published a pro-MBL editorial by CUNA President/CEO Bill Cheney earlier this week. CUNA has also actively promoted lifting the MBL cap through facebook and other online media sources. Legislation that would lift the MBL cap from the current 12.25% of assets threshold to 27.5% of a credit union’s total assets has been proposed by Sen. Mark Udall (D-Colo.). CUNA has estimated that lifting the MBL cap to 27.5% of total assets could provide up to $10 billion in new funding to small businesses and create over 100,000 new jobs in the first year following enactment. Cheney has targeted this week as a pivotal opportunity to increase Senate support before the U.S. Congress returns on Sept. 14, and credit union supporters and state leagues have written letters to editors, submitted their own editorials to local press, and directly contacted their legislators through in-district town hall meetings. CUNA this week will also meet directly with President Obama's economic advisors to seek their support for lifting the MBL cap. A small business jobs package, which could still include the MBL legislation, is expected to be voted on by the Senate next week.

Freddie Mac provides enviro loan guidance

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WASHINGTON (9/9/10)--Freddie Mac recently released guidance on the purchase restrictions placed on mortgages secured by properties that are subject to Property Assessed Clean Energy (PACE) obligations. In general, Freddie Mac has said that it would not “purchase mortgages secured by properties subject to PACE obligations with first lien priority.” Freddie Mac in a release noted that this restriction has been waived for all mortgages that it settled before July 6 and “that were secured by properties subject to PACE obligations with first lien priority” originated before that date. “Nevertheless, if a borrower who has received a waiver wishes to refinance his or her mortgage with Freddie Mac, that borrower must payoff the existing PACE obligation as a condition to obtaining a new mortgage, unless the refinancing is conducted under Freddie Mac's Relief Refinance Mortgages offering,” Freddie Mac added. Freddie Mac also recently reported that both 30- and 15-year mortgage rates remained at record lows during the week ended Sept. 2. The weekly mortgage survey recorded average rates of 4.32% and 3.83%, respectively. The 5-year Treasury-indexed hybrid adjustable-rate mortgage also fell to record levels during that week, with a recorded average rate of 3.54%. For the Fannie Mae PACE announcement and the mortgage survey, use the resource links.

NACHA to address rule problem points

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WASHINGTON (9/9/10)--The Electronic Payments Association (NACHA) has proposed several changes to its operating rules that would eliminate some so-called “pain points,” areas of misunderstanding, and other problems that it identified during a rules simplification initiative that it completed earlier this year. NACHA in April reorganized its rules around the rights and responsibilities of participants in the electronic payment network, making the rules “more navigable by participants.” NACHA President/CEO Janet Estep at that time said that NACHA’s goal was “to make the rules more easily understood and the corresponding information easier to find." According to NACHA, the proposed rule changes will impact some third-party senders and originators. Specifically, NACHA has proposed requiring third-party senders to conduct yearly compliance audits and requiring Originating Depository Financial Institutions (ODFIs) to provide information on their return entries to loan originators. NACHA has also sought to clarify rules that require a receiving depository financial institution (RDFI) to return a credit entry returned to the RDFI by its consumer customer, as well as requirements regarding revocation of authorization for single-entry transactions. NACHA has also proposed altering its rules addressing the warranties and liabilities of associations, and has asked financial institutions for information on authorization requirements for corporate entries, notifications of change for single-entries, and stop payment return reason codes. Comments may be sent to NACHA until Sept. 30, and the Credit Union National Association will also accept comments until Sept. 24. For more on the NACHA proposals and CUNA’s comment call, use the resource link.

NCUA to CUNA Expect merger registry in Oct.

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WASHINGTON (9/9/10)—The National Credit Union Administration (NCUA) said credit unions can expect a national merger registry “to be live by October.” The registry, an idea initally recommended by the Credit Union National Association. would provide the names of potential credit union merger partners. The registry is just one innovation sought by the Credit Union National Association (CUNA) regarding the regulators’ approach to voluntary mergers. The trade group has also urged the agency to address due diligence and loss-sharing incentives as it further refines its approach to the merger process. CUNA, in an August letter to all three NCUA board members, said that the agency also should provide credit unions with greater information on how it works with assorted state regulators in the event that a dual-chartered credit union is involved in a merger. CUNA also recommended that NCUA provide greater detail on its criteria for selecting which credit unions on the merger partner registry should serve as acquirers. Responding to the CUNA letter, NCUA Chairman Debbie Matz wrote that the NCUA will continue to evaluate the merger process and consider improvements. “I do not anticipate a change in the required due diligence a continuing credit union must exercise to ensure the acquired credit union is appropriate for their operation,” the head of the agency wrote. She also noted that the NCUA continues to work closely with state supervisory authorities to obtain names of potential merger candidates when an assisted merger resolution is being sought. The late-summer CUNA letter also broached to the agency many credit unions’ concern that the NCUA is increasingly using documents of resolution, letters of understanding and agreement, and cease and desist orders in its supervisory activities. CUNA asked the NCUA to further examine some of its own supervisory practices. Matz said that NCUA administrative actions are intended to minimize credit union losses. “And if credit union losses are lower,” she added in her response, “credit union assessments will be lower.” Matz also thanked CUNA for its comments on the issues and asked to be kept apprised of CUNA’s thoughts “on these and other issues of mutual interest.”

Inside Washington (09/08/2010)

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* ALEXANDRIA, Va. (9/9/10)--Debbie Matz, National Credit Union Administration chairman, who will be leading a town hall meting in Portland, Ore. (News Now Aug. 19) on Oct. 5, will also address the annual meeting of the Credit Union Association of Oregon on Oct. 6. “The Portland Town Hall will be an ideal opportunity for credit union leaders in Oregon, and across the Northwest, to have a dialogue with NCUA leadership on the major issues of the day,” Matz has said. Oregon credit union leaders are likely to discuss with Matz the health of the share insurance fund, regulatory and examination burdens, and comment on recently passed federal regulations. Credit union leaders also will express their support for increased an increased cap on member business lending, said the Credit Union Association of Oregon (Oregon Outlook September 2010) ... * WASHINGTON (9/9/10)--The Internal Revenue Service has issued guidance regarding changes to the use of certain tax-favored arrangements, such as flexible spending arrangements to pay for over-the-counter medicines and drugs. Under the Affordable Care Act, enacted in March, the cost of over-the-counter medicine or drugs cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, eye glasses, contact lenses, co-pays and deductibles. The standard applies to purchases made on or after Jan. 1 … * WASHINGTON (9/9/10)--The Federal Deposit Insurance Corporation (FDIC) has received numerous reports of suspicious telephone calls where the caller claims to represent the FDIC and is calling regarding the collection of an outstanding debt. Callers have alleged that the recipient is delinquent on a loan payment that was applied for over the Internet or through a payday lender. The loan may or may not exist. The caller attempts to authenticate the claim by providing sensitive personal information, such as name, Social Security number, and date of birth, supposedly taken from the loan application. The recipient is then strongly urged to make a payment over the phone to “avoid a lawsuit and possible arrest.” If a caller demonstrates that he or she has the recipient's sensitive personal information, such as Social Security number, date of birth, and bank account numbers, the recipient may be the victim of identity theft and should review his or her credit reports for signs of possible fraud. The individual should also consider placing a “fraud alert” on his or her credit reports, the FDIC said. The agency generally does not initiate unsolicited telephone calls to consumers and is not involved with the collection of debts on behalf of operating lenders and financial institutions ...

Inside Washington (09/07/2010)

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* WASHINTON (9/8/10)--The Federal Reserve is watching for Wall Street banks that devise more complicated derivatives instruments in an effort to avoid new regulations. Regulators worry that bank derivatives dealers could structure more over-the-counter derivatives to fall outside standardized transactions, which are regulated under the Dodd-Frank Act, said American Banker (Sept. 7) ... * WASHINGTON (9/8/10)--The Internal Revenue Service has released a draft version of Form 8941 that small businesses and tax-exempt organizations can use to calculate small business health care tax credit when they file income tax returns next year. A small business will include the amount of the credit as part of the general business credit on its income tax return. Tax-exempt organizations will claim the small business health care tax credit on a revised Form 990-T. The 990-T is used by tax-exempt organizations to report and pay the tax on unrelated business income. The form will be revised for the 2011 filing season so eligible tax-exempt organizations can claim the small business health care tax credit ...

Low loan growth historic but an opportunity CUNA

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WASHINGTON (9/8/10)—Despite ongoing tough economic conditions, Credit Union National Association (CUNA) Chief Economist Bill Hampel has said that there is room for loan growth at credit unions if credit unions gain adequate market share. CUNA’s recently released monthly review of credit unions (News Now Sept. 3) found that credit union savings balances rose 0.8% in July, bringing the total amount of savings held in credit unions to $801.5 billion. Savings rates in general are being held down as credit union members and consumers use extra cash to pay down their existing debts, Hampel added. "Households seem to be directing much of their available cash balances to paying down loans rather than increasing savings," said Hampel. "This will make building loan portoflios particularly difficult without an increase in market share." CUNA’s monthly survey also found that credit union loan balances again were down in July, contributing to a total loan balance decline of 1% during 2010. The most notable declines in credit union loans, which have decreased by nearly $5 billion compared to 2009 numbers, have come in both fixed and adjustable mortgages for primary residences. Hampel said that the current period represents the slowest rate of loan growth charted since World War II, and predicted that 2010 could end with zero loan growth for credit unions.

CUs can comment on national fin. ed. policy plan

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WASHINGTON (9/8/10)--The Financial Literacy and Education Commission (FLEC) is seeking comment before it finalizes its new draft version of a national strategy for financial literacy. Comments must be received by Sept. 19. FLEC was created by the U.S. Congress in 2003 and charged with boosting the country’s financial literacy through development of a national strategy for consumer education. It’s led by the U.S. Treasury and is comprised of the leaders of 19 other federal agencies, including the National Credit Union Administration. In 2006, the commission released its first National Strategy for Financial Literacy and in July 2009, the body set up a new working group to create a “comprehensive and inclusive process” for education. The working group identified five action areas--policy, education, practice, research, and coordination. The working group's next steps will focus on implementation of the National Strategy and how different types of organizations might integrate the plan into their work. In its request for public comment, FLEC poses a series of specific questions ranging from “do you agree with the vision statement” to “how would your organization implement the draft National Strategy”. Use the resource link below to read the Treasury’s request for comment.

MBL push vital before Senate return Cheney

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WASHINGTON (9/8/10)--Credit Union National Association (CUNA) President/CEO Bill Cheney began the shortened, post-Labor Day week by again proclaiming in national media that the government needs to unshackle credit unions and allow them to help the economy by increasing their member business lending (MBL) potential. In editorials published in The Washington Times and on the political blog dailycaller.com, Cheney stressed that increasing the MBL cap would allow the government to aid the economy at no cost to taxpayers. CUNA has estimated that lifting the current cap to 27.5% of total credit union assets would create at least 108,000 new jobs and inject more than $10.8 billion in new credit for small businesses in the first year following enactment. There is currently a 12.25% statutory cap on such lending. “While (increased MBL authority) alone would not solve the nation's unemployment and growth problems, it certainly would help, and it would be an easy, painless fix,” Cheney added in the Times editorial. Senate passage of an MBL proposal offered by Sen. Mark Udall (D-Colo.), which would “open up a lending channel and create new jobs,” should be “a no-brainer,” Cheney added. President Barack Obama will reportedly propose a number of tax breaks aimed at helping businesses, including small businesses. Cheney and CUNA contacted Obama last week, urging him to help credit unions help the economy by supporting MBL legislation, and CUNA this week will again take the case for an MBL cap lift directly to the White House during a meeting with President Obama’s economic advisors. Cheney called on readers to urge their legislators to support the MBL legislation, as credit union leagues and credit union backers nationwide continue to do. Cheney noted that these supporters have written letters to editors, submitted their own editorials to local press, and directly contacted their legislators through in-district town hall meetings. Cheney on Tuesday targeted this week as a pivotal opportunity to increase Senate support before Congress returns on Sept. 14. For both of the editorials, use the resource links.

Inside Washington (09/06/2010)

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* WASHINGTON (9/7/10)--There are signs that banks’ loan standards are loosening, according to a report released Thursday by the Office of the Comptroller of the Currency. That’s good for credit markets, provided banks have sound underwriting and don’t compromise their standards because of competitive pressures, said Dave Wilson, deputy comptroller for credit and market risk. Examiners noted that risk in commercial and retail portfolios increased for the third consecutive year, and they expect portfolio risk to increase over the coming year. The increase was due to the combined effects of loans previously underwritten with more liberal standards and continued economic weakness. This year’s survey also indicated that most banks use the same underwriting standards regardless of whether they intend to hold or distribute credits. The OCC’s survey is a compilation of examiner observations and assessments of credit underwriting standards at the largest national banks. The 2010 survey included 51 of the largest national banks and covered the 12-month period ending March 31. The aggregate total of loans was $4 trillion, which represented more than 93% of all outstanding loans ... * WASHINGTON (9/7/10)--Members of the Financial Crisis Inquiry Commission challenged Federal Reserve Board Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair over whether the regulatory reform law will eliminate future government bailouts. Both Bernanke and Bair said there will be no more government bailouts. Bair said that the Financial Stability Oversight Council, created by the regulatory reform law, which was enacted July 21, will be held accountable. Some panelists were not convinced that there would be no more bailouts, and asked if the stability council was any different than the President’s Working Group. Bair said the group is different and will be a more “robust, comprehensive” effort (American Banker Sept. 3). The group also has the authority to break up a risky institution and order that an institution without a living will be divested, Bernanke and Bair said ...

CUNALeagues respond to CU concerns on supervisory issues

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WASHINGTON (9/7/10)--The Credit Union National Association (CUNA) has announced the development of a new website, entitled "Exam and Supervisory Issues," to respond to the supervisory concerns of credit unions nationwide. CUNA President/CEO Bill Cheney said that CUNA has long supported “strong but reasonable” supervision. The site, which will be accessible through the "Top Initiatives" section of CUNA's home page, will include an incident reporting form. The incident reporting form, which credit unions may complete online, will allow credit unions to detail their most recent examination experiences and problems they may have encountered with their examiners. Ohio Credit Union League President and Chairman of CUNA's Supervisory Issues Working Group Paul Mercer has said that the addition of the incident reporting form will "enable CUNA and the leagues to help document issues credit unions are raising regarding examination concerns and to provide summary information to regulators that will document these concerns with concrete information and examples." Credit unions' confidentiality will be protected and only summaries will be provided to regulators, without identifying individual credit unions, he added. Cheney noted that the Exam and Supervisory Issues site will be expanded in coming weeks to include a Credit Union Bill of Examination Rights, as well as a policy addressing reasonable expectations for credit unions, examiners, and regulators regarding supervisory and related issues. The policy, which is still under development, and the Bill of Rights will both reflect broad input from CUNA’s Governmental Affairs Committee and its Supervisory Issues Working Group, including league attorneys serving on the group. The CUNA Board will review the policy later this month. The site also will include a 'commentary' report on the scope of credit unions' concerns, regulators' responsibilities and credit unions' authority to provide alternative solutions in response to examiner directives. "Credit unions want their regulators to do their jobs and to help contain National Credit Union Share Insurance Fund costs, but credit union officials also need to be able to do their jobs. Sometimes there is a fine line between credit unions being able to exercise their business judgments and examiners' expectations of how issues should be addressed," he added. "Working with the leagues, we want to make sure that credit unions have the resources and support they need to raise questions, as appropriate, to their examiners and receive reasonable answers, including the legal authority for examiner directives, and be able to offer alternative approaches the credit union feels are in the best interests of its members," Cheney stated.

Cheney to Obama Include CUs in economic recovery plans

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WASHINGTON (9/7/10)--Credit unions can be an integral part of the Obama Administration’s plans to “do everything (it) can” to aid small businesses if the current cap on member business lending (MBL) is lifted, Credit Union National Association President/CEO Bill Cheney wrote late last week. In a letter sent to the White House, Cheney applauded the Obama administration for its commitment to small business, and reminded the administration that U.S. Treasury Secretary Timothy Geithner earlier this year publicly backed lifting the MBL cap in a letter to Congress. Geithner also encouraged the administration to include MBL language in future economically oriented legislative packages. The MBL measure “will help and should not be left off the table,” Cheney added. MBL legislation, which has been introduced into the Senate by Mark Udall (D-Colo.), would lift a credit union's total MBL cap from 12.25% to 27.5% of assets. Similar legislation, which has over 100 co-sponsors, has been introduced by Rep. Paul Kanjorski (D-Pa.) Increasing the lending cap imposed on credit unions would inject an additional $10 billion in new capital into small businesses nationwide during the first year following enactment, capital that would create over 100,000 new jobs, according to CUNA estimates. This funding would be provided at no cost to taxpayers. For the full letter, use the resource link.

FFIEC proposes FOIA revisions

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WASHINGTON (9/7/10)--Freedom of information Act (FOIA) regulation revisions that would improve access to records and “provide clearer guidance to requesters on how to obtain records under the FOIA” are being considered, the agencies that comprise the Federal Financial Institutions Examinations Council (FFIEC) announced late last week. The FFIEC acts as a coordinating body for the National Credit Union Administration and other federal financial regulators. While it serves as the coordinating body, the individual credit union, bank and thrift agencies have their own sets of FOIA rules. Specifically, the FFIEC changes, if approved, would bring the FFIEC’s existing regulations in-line with FOIA amendments contained in the Electronic Freedom of Information Act Amendments of 1996 and the OPEN Government Act. These changes would increase the current time limit for FOIA request responses and provide for “expedited processing of FOIA requests under certain conditions.” The FFIEC revisions will also “further clarify” FOIA request processing policies and procedures and improve overall FOIA operations. The FFIEC has released its proposal for public comment. Comments on the proposal must be submitted to the FFIEC by Oct. 4. For the full proposal, use the resource link.

Original CU plaintiffs ask to drop out of WesCorp suit

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WASHINGTON (9/3/10)--The original credit union plaintiffs in a lawsuit against Western Corporate FCU (WesCorp) and its former directors and current and former officers have decided to forego further participation in the case. Late last year, the National Credit Union Administration (NCUA) successfully petitioned the court to intervene as plaintiff in the lawsuit. The NCUA is conservator of WesCorp. In a brief filed with the U.S. District Court for the Central District of California, the seven credit unions that first brought the suit against the corporate asked that the NCUA be viewed as the sole plaintiff “to further prosecute this action.” The credit unions are 1st Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU, and Tulare County FCU--all of which were all members of WesCorp. Earlier this week, the NCUA filed an amended complaint in the case, which alleged various breaches of fiduciary duties of care and gross negligence on the part of 15 former WesCorp directors and officers in connection with over-concentration of certain types of Option ARM Mortgage Backed Securities.

Inside Washington (09/02/2010)

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* WASHINGTON (9/3/10)--Regulators should be ready to shut down large financial institutions that threaten the financial system, said Federal Reserve Board Chairman Ben Bernanke. He testified before the Financial Crisis Inquiry Commission this week. Bailing out the risky institutions is not a healthy solution, he said. The regulatory reform law empowers regulators to shut down the firms whose collapse would bring down the system. Too-big-to-fail institutions were a source of the financial crisis and impeded policymakers’ efforts to contain it, Bernanke said (The Associated Press and Reuters Sept. 2). Bernanke also noted that legally, he could not have saved Lehman Brothers, which collapsed in 2008. Commission Chairman Phil Angelides had questioned whether politics were involved in the Fed’s decision not to bail out Lehman, but the Fed has said it had no authority to rescue the firm. Lehman did not have the capital to borrow enough to prevent collapse ... * WASHINGTON (9/3/10)--The Financial Crimes Enforcement Network (FinCEN) Wednesday reminded financial institutions of concerns and anti-money laundering guidance regarding informal value transfer systems (IVTS). Although FinCEN issued guidance in 2003 on money services businesses, the agency also warned that the systems have been used to fund terrorism (American Banker Sept. 2). IVTSs operate in the U.S. and interact with other financial institutions to store currency, remit and receive funds and clear checks. They must register with FinCEN ... * WASHINGTON (9/3/10)--The Federal Deposit Insurance Corp. has extended the application period by 30 days for a pilot program that will evaluate the feasibility of insured depository institutions offering low-cost transactional and savings accounts for the underserved. The extension responds to several institutions that indicated more time is needed to evaluate their programs. The new deadline is Oct. 15. Institutions will be notified of their selection by Oct. 29. The program was announced Aug. 10 ...

Treasury tries to reach unbanked through refunds

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WASHINGTON (9/3/10)--The U.S. Treasury Department, in a move meant to seize tax refund season as an opportunity to bring unbanked Americans into relationships with financial services providers, announced the launch of a new debit card pilot program that would require delivery of refunds through direct deposits. Treasury said its pilot will deliver targeted offers to certain low- and moderate-income individuals to sign up for new accounts with debit card access at tax time in order to receive their refunds through direct deposit. It will also test offering accounts that can be used year-round in the future to deposit other sources of income, store money safely, make purchases, pay bills, withdraw cash, and build savings. "Far too often, unbanked and underbanked Americans are forced to turn to high-cost alternative financial products--such as check-cashing and other services--that take a big bite out of the savings of those who can least afford it," said Assistant Treasury Secretary for Financial Institutions Michael Barr in a release announcing the program. "For many individuals, a tax refund is the single largest payment that they will receive each year. That's why tax season is a great opportunity to deliver safe, low-cost financial products to the unbanked and underbanked that will help those Americans build stronger foundations for their financial futures." The pilot is expected to launch during next year's tax return filing season. Treasury will reach out to eligible taxpayers in early 2011 through direct mail and by partnering with the private sector to insert enrollment into the paychecks and paystubs of select individuals who are not already using direct deposit to receive their tax refunds. Treasury has said that by March 2013 all federal payments, other than those made by the Internal Revenue Service (IRS), will only be delivered by electronic direct deposit or debit cards. With the new pilot, observed Kathy Thompson of the Credit Union National Association CUNA), Treasury seems to be trying to figure out to what degree the government can encourage people, who are getting paper refunds, to accept receiving a debit card loaded with the refund instead. Thompson is a CUNA senior vice president and associate general counsel for regulatory compliance.

Required use consumer protections backed by CUNA

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WASHINGTON (9/3/10)--The Credit Union National Association (CUNA) supports efforts by the U.S. Department of Housing and Urban Development (HUD) to ensure consumers are protected as they enter into real estate settlements. CUNA, in a comment letter to HUD on an advance notice of proposed rulemaking (ANPR), encouraged the agency to continue to seek ways to revise the exceptions to the current prohibitions on the "required use" of affiliated settlement service providers for residential mortgage transactions under the Real Estate Settlement Procedures Act (RESPA). The HUD ANPR aims to address situations in which some homebuyers commit to using a homebuilder's affiliated mortgage lender in exchange for construction discounts or discounted upgrades without sufficient opportunity to review the transaction or comparison shop among other lenders. CUNA believes increased scrutiny in this area is important because often, in practice, consumers aren’t given adequate time to shop for mortgage loans and settlement services, either from credit unions or other financial service providers, many of whom may be able to provide loans and services at a competitive rate and cost, even taking into account the benefits being provided by the homebuilder. CUNA recommended that consumer disclosures regarding the practice be beefed up, especially those given to first-time homebuyers, a group that may be more likely to rely on a homebuilder for objective advice. Under RESPA rules, referrals to affiliated settlement service providers are generally prohibited on the basis that the referrers’ return on investment in the affiliate would be considered a kickback or otherwise “a thing of value” in exchange for the referral, which is prohibited under Section 8 of RESPA. However, RESPA does allow such a referral if the following conditions are met, which has allowed these referrals to become a common industry practice:
* The referral is accompanied by a disclosure of the affiliation and estimated charges by the provider to which the consumer is referred; * The consumer is not specifically “required to use” a particular settlement service provider; and * The arrangement does not otherwise involve prohibited compensation.

Official insurance signs have March 2011 deadline

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WASHINGTON (9/3/10)--Starting March 2, 2011, federally insured credit unions must abandon any jury-rigged public displays that disclose a 2006 change in law that increased share insurance levels to $250,000, up from $100,000. That increase was first approved on a temporary basis and the National Credit Union Administration has allowed credit unions, in effect, to magic-marker over existing signage to declare that the ceiling has been raised. However, enactment of the Dodd-Frank Reform and Consumer Protection Act (Dodd-Frank Act) on July 21 made the $250,000 standard maximum share insurance amount (SMSIA) permanent. And while the SMSIA is still subject to adjustments for inflation, such an adjustment will not be made until the value of the $100,000, inflation adjusted since 2005, exceeds the current SMSIA. That is not expected to happen in the foreseeable future. So the NCUA, in a Federal Register document published Thursday, said all federally insured credit unions need to display updated official signage as of the March 2011 compliance date. The Federal Register document noted that the higher SMSIA became permanent as of Sept. 2.

Wis. bankers mischaracterize tax report says league

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PEWAUKEE, Wis. (9/2/10)--The Wisconsin Bankers Association (WBA) is mischaracterizing an advisory panel's report on possible tax law revisions by focusing on one option mentioned, according to the Wisconsin Credit Union League. After the President's Economic and Recovery Board (PERAB)--an outside advisory panel that is not part of the Obama administration--released Monday a report listing possible options to consider for tax reform, WBA issued a press release urging the elimination of credit unions' corporate tax exemption. (To access the release, use the link.) The 118-page report lists the exemption among a number of options. "There they go again," said Brett Thompson, president/CEO of the Wisconsin Credit Union League. "WBA is blatantly mischaracterizing information to suit its own anti-consumer agenda." He noted the report, "which is by an independent panel not tied to government despite its use of the term 'presidential' in its name, merely states a list of options the government could pursue to reform tax law." WBA failed to mention the report "has at least six mentions of Subchapter S arrangements--arrangements often used by banks to reduce their tax obligation," Thompson said. "While banks have forever wished to heap more taxes on the already tax-burdened residents of Wisconsin who own credit unions, no one who sets public policy has ever deemed that a good move--and for good reason," he said. "I don't believe for a second that the President or Congress wants to raise taxes on 92 million Americans in this manner considering the current economic climate." When the PERAB report was released, the Credit Union National Association (CUNA) sent a letter PERAB board members to underscore the public-policy value of the federal credit union tax status. CUNA President/CEO Bill Cheney immediately and adamantly defended the credit union tax exemption, explaining that the strong public-policy reasons that first inspired that tax status remain valid today. "It may be the case that not all tax preferences have lived up to expectations, but the credit union tax exemption is one of the highest-yielding investments the federal government has made," Cheney wrote. CUNA figures show that America's 92 million credit union members receive substantial benefits in the form of better pricing on services, saving them about $7.5 billion a year. The savings to consumers is especially significant when measured against the $1.5 billion in potential revenue a year that the government says is represented by the credit union tax exemption. "The tax exemption helps to ensure consumers have choices beyond commercial banks in the financial marketplace. It is appropriate to view these results not as an economic distortion," Cheney said, referring to the report's own language, "but as evidence of sound public policy." "CUNA will continue our strongest efforts to ensure that policymakers understand the purpose and effects of the credit union tax exemption," Cheney concluded, offering to meet and discuss points raised in his letter. The letter was sent also to representatives of the U.S. Treasury Department and White House, as well as to congressional leaders and National Credit Union Administration Chairman Debbie Matz.

Inside Washington (09/01/2010)

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* ALEXANDRIA, Va. (9/2/10)--Credit unions interested in accessing the Federal Reserve Board’s sample opt-in notice for overdraft services can do so through a regulatory alert (10-RA-12) recently posted by the National Credit Union Administration. As of Aug. 15, financial institutions are prohibited from charging consumers fees for paying overdrafts on ATM transactions and one-time debit card transactions unless consumers specifically “opt in” to overdraft services. While the alert noted that credit unions are not required to use the Fed’s sample notice, the NCUA said the model is a convenient way to provide the required notice to members. “The Fed’s easy-to-understand notice was created to raise consumers’ awareness of overdraft fees, as well as options available to reduce those fees,” the alert said … * WASHINGTON (9/2/10)--The Financial Crimes Enforcement Network (FinCEN) last week assessed a civil money penalty against a North Carolina limited liability company (LLC) for what the agency identified as a host of offenses against anti-money laundering (AML) and suspicious activity rules under the Bank Secrecy Act (BSA). Pinnacle Capital Markets, LLC, based in Raleigh--without admitting or denying either the facts or determinations of FinCEN--consented to the penalty. Among the charges alleged by FinCEN were these failures: lack of adequate internal controls combined with deficient training and independent testing, resulting in an ineffective AML compliance program not tailored to the risks of Pinnacle’s business; failure to verify the identity of customers by not obtaining required customer identification program information for accountholders; and deficiencies in the firm’s procedures and monitoring for suspicious transactions leading to failure to file suspicious activity reports in accordance with the BSA. FinCEN also determined that Pinnacle’s business model encompassed heightened AML risk due to concentrated exposure to high risk foreign jurisdictions. This civil money penalty order states that the fine will be paid in two $25,000 payments to the Treasury Department … * WASHINGTON (9/2/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said the agency is preparing an interim rule regarding its new resolution authority over systemically important financial institutions and nonbanks. The rule will clarify how the agency will treat creditors, Bair said (American Banker Sept. 1). The FDIC will follow the same priority that bankruptcy court does in regards to concerns over the regulatory reform law--signed July 21--which gives FDIC flexibility to differentiate among creditors during a resolution. The authority would be used only to maximize recovery she added ... * WASHINGTON (9/2/10)--The Financial Crisis Inquiry Commission Wednesday tried to overturn the notion that Wells Fargo’s purchase of Wachovia was completed without the government’s help. During a hearing, members focused on a change to tax code made by the Internal Revenue Service (IRS) after the Federal Deposit Insurance Corp. said it would provide open-bank assistance to Wachovia (American Banker Sept. 1). Under the deal, announced Sept. 25, 2008, the FDIC would have guaranteed Wachovia’s sale to Citigroup. A few days later, the IRS announced a change to allow banks to carry over losses from the acquisition of a troubled institution. Robert Steel, former Wachovia CEO, said the deal wasn’t a government bailout because it helped several institutions. Bill Thomas, commission vice chair, said the change was a “rifle shot,” because the IRS modified the law for a certain group of institutions. Congress later reversed the change ...

136.9 million-asset First American CU closed

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ALEXANDRIA, Va. (9/2/10)--First American CU, a $136.9 million-asset credit union, was closed by state authorities Tuesday due to what regulators termed its declining financial condition. The National Credit Union Administration (NCUA) was appointed liquidating agent. First Community FCU, of Parchment, Mich., signed an agreement with the NCUA under which it assumes the assets and liabilities of the closed credit union and serves its almost 17,500 members. First Community, with its 12 branches, also serves those who live, work, worship, or attend school in and businesses and other legal entities located in Allegan, Barry, Berrien, Branch, Calhoun, Cass, Kalamazoo, St. Joseph, or Van Buren Counties, Michigan. It has $474 million in assets and serves approximately 61,000 members. First Community FCU is a full-service credit union with 12 branches in Michigan. First American CU's declining financial condition led to its closure and subsequent purchase and assumption. At closure, First American CU had $136.9 million in assets and served over 17,447 members. First American is the 15th federally insured credit union liquidation in 2010.

Compliance Have whistleblower policy in place

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WASHINGTON (9/2/10)--Does your credit union have a whistleblower policy? This is the opening question in Credit Union Magazine’s September compliance article, “Consider Whistleblower Policy Protections.” The article explains how a whistleblower policy can protect a credit union, its employees, and volunteers when there are concerns about possible wrongdoings in the credit union. Christopher Pippett, a Pennsylvania attorney who advises credit unions, explains the growing interest in these policies. “Tax-exempt organizations began seriously focusing on the desirability of having a whistleblower policy a couple of years ago when the Internal Revenue Service (IRS) revised its Form 990…The IRS explains in its instructions that it believes having a whistleblower policy is one indicator of good governance practices.” Form 990, “Return of Organization Exempt from Income Tax,” requires state-chartered credit unions to report annually whether they have a whistleblower policy. Pippett also notes provisions in the new financial reform law that, while not applicable to credit unions, address whistleblower policies to protect employees against employer retaliation for reporting suspicious securities activities of publicly traded companies. This shows the government’s continued interest in businesses providing employees a way to report concerns, he writes. In his article, Pippett discusses what a good whistleblower policy should address, and suggests an outline of a possible policy for credit unions, which should state:
* The purpose of the whistleblower policy; * The expectation that employees and volunteers will report concerns; * The reporting process; * The fact that no retaliation for reporting will occur, as long as the person is acting in good faith; * The fact that reports will be handled confidentially; * What the credit union will do in general terms to investigate any reported concern; and, * How the credit union will inform employees and volunteers of the whistleblower policy.
Pippett notes that numerous examples of whistleblower policies from a variety of non-profit organizations are readily available on the Internet. All of Credit Union Magazine’s compliance articles can be found on CUNA’s compliance webpage.

NCUA files amended complaint in WesCorp suit

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ALEXANDRIA, Va. (9/1/10)—In its roles as conservator of Western Corporate FCU (“WesCorp”) and plaintiff in a lawsuit against the corporate’s former directors and current and former officers, the National Credit Union Administration (NCUA) Tuesday filed an amended complaint with the U.S. District Court for the Central District of California. The action amends a November 2009 complaint filed by the original plaintiffs--lst Valley CU, Cascade FCU, Glendale Area Schools FCU, Kaiperm Northwest FCU, Northwest Plus CU, Stamford FCU, and Tulare County FCU—which were all members of WesCorp. But like that complaint, the new documents allege various breaches of fiduciary duties of care and gross negligence on the part of fifteen former WesCorp directors and officers in connection with over-concentration of certain types of Option ARM Mortgage Backed Securities. The complaint also alleges breaches of fiduciary duty and fraud on the part of two former WesCorp officers and unjust enrichment on the part of one former officer in connection with irregular payments from WesCorp’s Supplemental Executive Retirement Plans. Credit Union National Association (CUNA) President/CEO Bill Cheney is among the former directors named in the suit. Learning of NCUA’s amended complaint, CUNA Chairman Harriet May strongly disagreed with NCUA’s decision to include Cheney and noted that she and the CUNA board recognized his service to WesCorp ended in February 2006, before most of the securities that caused losses were even purchased and during a time when NCUA had an examiner of its own on-site at WesCorp. “Bill served voluntarily on the corporate board with utmost professionalism, adhered strictly to his fiduciary duties and acted in the best interests of Wescorp’s member credit unions--including his own at the time,” noted May, who is also CEO of GECU in El Paso, Texas. “Bill is a man of the highest integrity who has spent 25 years in the credit union movement--actively seeking and attaining state and national leadership roles--with a singular dedication to its success, and nothing else,” she said.