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Filed on April 13, 2009, published the first business day after.
- CDFI certification info sessions start this week
- Land acquisition flexibility effective April 27
- Inside Washington
- Youth Week begins Sunday
- Tax credit packs CU’s homebuyer seminars
- Filene report tracks mortgage risk, delinquency, rates
- Chattanooga branch serving Hispanics to close
- GM extends Invest in America to end of year
- Michigan foundation OKs $5,000 grant to BizKid$
- Jamaica CUs studying development bank's fee proposal
- County's schools transfer summer pay program to CU
- PSCU Financial Services issues $45.4 M dividend
- CU System briefs
- Market News
- News of the Competition
- Collections/Member Service audio conference soon
CDFI certification info sessions start this week
WASHINGTON (4/14/09)—Credit unions interested in Community Development Financial Institution (CDFI) certification should note the U.S. Treasury Department will be conducting a series of conference calls on the subject.
The information sessions, starting this week, are intended to provide a forum for credit unions and other potential CDFI applicants to ask questions directly of CDFI Fund staff about becoming certified.
The Treasury Department's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. CDFIs are financial intermediaries such as certain credit unions, banks, loan funds, venture capital funds, corporation-based lenders and microenterprise development loan funds.
To become certified, Treasury says an organization must: be a legal entity, have an eligible primary mission, be a financing entity, serve an eligible target market, be accountable to the target market, provide corresponding development services, and not be controlled by a government entity.
Among other benefits, CDFI certification allows participants to apply for financial assistance through the CDFI Program.
The 60-minute information sessions are scheduled for:
- April 16 at 2 p.m. EST;
- May 21, 2 p.m. EST;
- June 18, 2 p.m. EST; and
- July 16, 2 p.m. EST.
Use the resource link below for more information about CDFI certification eligibility and the application process.
Land acquisition flexibility effective April 27
WASHINGTON (4/14/09)—The Credit Union National Association (CUNA) reminds credit unions that they have increased flexibility as of April 27 with regard to acquiring unimproved land for future expansion.
Under a rule adopted by the National Credit Union Administration last month, RegFlex-qualifying federal credit unions will have up to six years to occupy unimproved land acquired for expansion, without a waiver.
Previously, a RegFlex credit union minimally had to partially occupy the premises within three years or it was required to obtain a waiver from NCUA. In a recently released final rule analysis, CUNA underscores that the rule applies only to unimproved land.
The NCUA has said it made the rule change to recognize that "real estate transactions are complex, time consuming, and can involve a host of wide-ranging issues . . . [t]his is especially true in the unimproved land context considering the addition of construction-related issues."
A federally insured credit union automatically qualifies for RegFlex classification under 12 C.F.R. part 742 if it has had a composite CAMEL rating of 1 or 2 for its last two examinations and has been "well capitalized" under NCUA rules for the previous six quarters.
Use the resource link below to read CUNA's rule analysis.
Inside Washington
- WASHINGTON (4/14/09)--Insolvent financial institutions should be resolved like failed banks have been in the past, Federal Reserve Bank of Kansas City President Thomas Hoenig said Thursday (American Banker April 13). The government has recapitalized banks with private money, which has not helped, he said. Old methods that have helped failed banks in the past could stabilize some institutions. However, a large failed firm would need to be operated as a conservatorship or a bridge organization, he added ...
- WASHINGTON (4/14/09)--Social Security benefits for thousands of people with disabilities are being delayed because of state employee layoffs and furloughs, according to Michael J. Astrue, Social Security commissioner (The New York Times April 13). Laying off employees or giving them furloughs does not save states any money, he said. It just delays payments to the disabled, who rely on the funds. The Social Security Administration anticipates that disability claims will rise to more than three million this year, compared with 2.6 million last year. The agency pays $12 billion per month to more than 13 million people ...
- WASHINGTON (4/14/09)--Private student lenders and their congressional allies are trying to offset President Barack Obama's plan to eliminate a subsidized loan program and put the money into scholarships for low-income students (The New York Times April 13). The Congressional Budget Office says the plan would save $94 billion and broaden Pell grants for poor students. Republicans say the plan indicates that the president is trying to expand the government. Democrats are split on the issue. The private loan industry was rescued last year and has begun fighting the plan, saying that the Obama administration is trying to collect profits from federal student loans ...
Youth Week begins Sunday
MADISON, Wis. (4/14/09)--The Credit Union National Association's (CUNA) National Credit Union Youth Week kicks off Sunday, with more than 400 credit unions signed up for the savings challenge.
About 435 credit unions have signed up as of Monday morning, said Lin Standke, CUNA Youth Week manager.
The Savings Challenge takes place during Youth Week. During the challenge, youth deposit money into savings accounts at credit unions. Credit unions also can win $100 from CUNA for one of their youth members.
Last year, more than 76,500 young members deposited nearly $12 million into their accounts. About 6,748 were new accounts.
This year's Youth Week theme is "The Magic of Saving."
Several credit unions have planned activities:
- Aberdeen Proving Ground (Md.) FCU is hosting a month-long series of promotions for Youth Week. Magicians will appear at the credit union's branches Saturday, and a "Magic of Saving" contest will run all month long. Members 18 years and younger can participate to win $100 cash or a $250 savings bond;
- Marshall (Mich.) Community CU will host a Kids Day event April 18 with a Bike Safety jamboree, a magician, and a presentation on managing money for kids and adults. Youth also can enter contests to receive $50 savings bonds and tickets to local amusement parks and events;
- Prime Financial CU, Cudahy, Wis., will host a coloring and essay writing contest. When youth make deposits to their savings accounts, they also will be enrolled to win $100; and
- The Michigan House and Senate declared April to be Financial Literacy Month (Michigan Monitor April 6). The Senate resolution was co-sponsored by State Sen. Randy Richardville (R-Monroe) and State Rep. Andy Coulouris (D-Saginaw).
The Michigan Credit Union League's Financial Literacy Legislative Challenge also is underway and credit unions can partner with a lawmaker in their district to host an education event. The program builds relationships between credit unions and lawmakers through presentations to students or visits to student-run credit union branches (Michigan Monitor April 6).
So far, about 18 lawmakers have expressed interest in partnering with a credit union, the league said.
Tax credit packs CU’s homebuyer seminars
MADISON, Wis. (4/14/09)--UW CU, Madison, Wis., has experienced an increase in participants at its homebuyer seminars, held in conjunction with the local housing authority, because of the government's $8,000 tax credit for first-time homebuyers.
Those attending the seminars want to know how the credit can be used, how they can get the money and if the credit union does anything with it, according to UW CU Director of Mortgage Lending Julio Rios (Wisconsin State Journal April 13).
About 700 UW CU members have applied for and received pre-approval for mortgages during the past three months. This figure is twice of what the credit union processed last year at this time and includes many first-time homebuyers, the newspaper said.
Taxpayers who purchase their first home before Dec. 1 can receive the credit on their 2008 or 2009 tax returns. The home must be their primary residence for three years after purchase.
UW CU has $1.08 billion in assets.
Filene report tracks mortgage risk, delinquency, rates
MADISON, Wis. (4/14/09)--The Filene Research Institute has released a research brief, Mortgage Borrower Risk Profiles, Delinquencies, and Interest Rates in 2005-2008, to help assess the three critical issues for both lenders and borrowers.
The brief, by Mark C. Meyer, CEO of Filene, and Luis G. Dopico, Macrometrix, provides marketplace analysis of mortgage pricing strategies, a review of delinquency rates across borrower characteristics and demographics from the period's survey data, and concludes with several strategic implications for credit unions.
One strategy suggests that credit unions may benefit from studying delinquency rates for mortgages and other loan types using in-house data reflecting their field of membership. For instance, changes in the national unemployment rate may have very different impacts on credit unions servicing federal employees, state employees, private companies, communities or nationwide professional groups affected by each recession in varying degrees.
"This type of analysis and data may also be of particular importance when institutions are facing especially large changes in their customer bases--for instance, following a merger, the expansion of a credit union's FOM, or the launch of a new product for a new set of customers," says the report.
The report, third in a series of Consumer Finance Research briefs based on information from Ohio State University's Consumer Finance Monthly, explores several research questions:
- What might a simplified mortgage pricing model look like?
- How do delinquency rates vary across borrowers' financial characteristics?
- How do delinquency rates vary across demographic groups?
- Did mortgage pricing based on rising house prices contribute to delinquencies? and
- How can both underpriced and overpriced mortgage loans be avoided?
"The ongoing mortgage crisis provides a painful reminder that financial institutions cannot assume that low delinquency rates during economic expansions will continue indefinitely," said Meyer.
"As this brief points out, many financial institutions underpriced mortgages in the mid-2000s. The interest rates they charged were not enough to cover eventual loan losses. These mounting losses, and the uncertainty surrounding their eventual size, mean that many financial institutions are now in deep disarray," he said.
Meyer noted that the temptation during a housing crisis is to err on the side of extreme safety. Many financial institutions try to avoid underpricing mortgages in the future by charging interest rates that reflect today's delinquency rates, or by rejecting more loan applications altogether. However, credit unions need to approach such measures with caution, and to recognize opportunities to serve members, he said.
For more information, use the resource link.
Chattanooga branch serving Hispanics to close
CHATTANOOGA, Tenn. (4/14/09)--The economy has taken a toll on a credit union branch that served Hispanics in Highland Park, Chattanooga, Tenn., the past two years.
Because of the economy, Holston Methodist FCU, based in Knoxville, will close its Highland Park branch, located in St. Andrews Center, on April 30, officials told the Chattanooga Times Free Press.
However, CEO Janet Tidwell said she hopes to consider opening another branch in Chattanooga when the economic situation improves.
Most of the branch's 223 accounts and 160 members are Hispanic, Stacy Johnson, member development director of the credit union, told the newspaper. She is also director of La Paz, a neighborhood group.
She noted there are ways for the branch's current members to keep their accounts with the credit union, but if they choose to close, the credit union is directing them to other institutions that serve the Latino community.
Mike Feely, director of the St. Andrews Center, praised the credit union's excellent service and said he is looking for a credit union or other lender interested in a partnership.
For many of the members of the branch, the credit union was their first involvement with a financial institution, Feely said in the article.
GM extends Invest in America to end of year
PLYMOUTH, Mich. (4/14/09)--General Motors (GM) has expanded its participation in Invest in America until Dec. 31. Previously, GM planned for the promotion to run through the end of March.
Invest in America is a credit union auto loan discount program offered by GM and Chrysler. Under the extension, consumers will receive discounts on any eligible new vehicle through the end of the year.
"As over 1,200 credit unions continue to promote the ‘Invest in America' credit union member discounts, the automakers are seeing great results with first-time and returning buyers," said David Adams, CUCorp CEO. "This is causing them to take this program serious. The contract extension reflects GM's satisfaction with the program and we continue to hope for a long-term, mutually beneficial partnership between GM and credit unions."
Chrysler is offering a Credit Union Member Cash Discount through June 30. Invest in America launched in December.
More than 73,000 vehicles have been sold through the Invest in America program, according to the Invest in America website, lovemycreditunion.org.
Michigan foundation OKs $5,000 grant to BizKid$
LANSING, Mich. (4/14/09)--The Michigan Credit Union Foundation Board of Trustees has approved a $5,000 grant for the PBS Biz Kid$ financial education program as part of the foundation's efforts to support financial literacy programs.
"BizKid$ is a quality, worthwhile tool for financial education outreach and something the foundation wanted to support," said Patrick LaPine, executive vice president of the Michigan Credit Union League (Michigan Monitor April 13).
The program, underwritten by America's credit unions for the past three years, promotes financial literacy to middle- and high school-age students and is aired in 97% of the U.S. public television market.
"In this economy it's imperative to continue to contribute financially to programs that are important in the long-run, and this is an example of something that can be very helpful for credit unions in their financial literacy efforts," LaPine said.
Jamaica CUs studying development bank's fee proposal
KINGSTON, Jamaica (4/14/09)--Jamaican credit unions are studying a proposal offered by the Development Bank of Jamaica (DBJ), which refused their request to increase loan spread and instead proposed credit unions raise their fees on the loans.
Jamaica Cooperative Credit Union League General Manager Glenworth Francis said the issue is not settled (Jamaica Gleaner Online April 12).
DBJ distributes loan capital through approved financial institutions and stipulates that the interest rate to end users can be no more than 3% higher than its rate to the institutions.
Credit unions, however, say they need about an 8% spread; otherwise it is unprofitable to distribute the DBJ funds. Instead of raising the spread, DBJ proposed that credit unions add fees to the loans to cover their costs.
Discussions about the spread surfaced last year when credit unions began opting out of a $1 billion program to funnel funds to small- and medium-size enterprises, saying the cost to administer the funds were 5% higher than the allowed spread, according to the article.
County's schools transfer summer pay program to CU
ROCKVILLE, Md. (4/14/09)--Montgomery County (Md.) Public Schools (MCPS) will move its summer pay program, which allows employees to set money aside throughout the school year for summer expenses, to MCT FCU, Rockville, starting next school year, 2009-2010.
"This will help the school system save money in administrative costs and enable MCPS employees to earn interest," said Sue DeGraba, MCPS chief financial officer (FOCUS Newsletter April 13).
Funds saved through the program will be disbursed to the county schools' employees during the summer of 2010 in five equal payments on July 2, July 17, July 31, Aug. 14 and Aug. 28. The payment schedule mirrors the credit union's current summer pay program payout schedule, said the Maryland and District of Columbia Credit Union Association.
MCT FCU's summer pay program is similar to the county schools' program in that it allows employees to deduct as much as they wish from each paycheck during the school year. However, MCT offers 2% annual percentage yield on all funds saved through its program, while the current MCPS program doesn't pay interest.
Although the school district recommends its employees save through the credit union's program, employees have the option of making summer savings arrangement with any financial institution of their choice.
PSCU Financial Services issues $45.4 M dividend
ST. PETERSBURG, Fla. (4/14/09)--PSCU Financial Services issued $45.4 million to its member credit unions--the largest dividend ever paid by any credit union service organization, PSCU Financial said.
Member-owner credit unions received 85% of the dividend in cash. The distribution included cash dividends of $35 million from the sale of Visa and MasterCard stock. Financial savings of $12.6 million also were passed along throughout 2008, PSCU Financial said.
PSCU Financial reported 2008 revenue of $633 million--an increase of 12% over 2007.
"The difficult economy can be the perfect storm for our industry," said David J. Serlo, PSCU president/CEO. "It's time for credit unions to expand programs and offer new services that drive members to make their credit union their primary financial institution."
PSCU Financial Services provides credit, debit, ATM, prepaid, bill payment, home and mobile banking, lending, collections and contact center solutions.
CU System briefs
- LYNCHBURG, Va. (4/14/09)--Alcoa Richmond FCU, which served employees of Alcoa in Richmond, Va., has merged with Virginia CU, also based in Richmond. The merger was effective April 1. Members of the $2.1 million asset Alcoa Richmond voted March 6 in favor of the merger after its sponsor company announced it was phasing out its Richmond operations. Virginia CU had assets of nearly $1.7 billion before the merger (Richmond Times-Dispatch ...
- ST. PAUL, Minn. (4/14/09)--Fort Snelling FCU (FSFCU), Minneapolis, has merged resources with Hiway FCU, a $739.5 million asset credit union in St. Paul. The merger became effective March 31. The combined credit union will retain the Hiway name. Fort Snelling had more than $33.6 million in assets and 5,500 members. "During this time of economic challenge, we looked to align ourselves with another credit union to create a stronger, sustainable financial organization," said Diane Menton, FSFCU president/CEO. She noted its members "will now have access to Hiway's expansive array of products, services and benefits." Hiway President Jeff Schwalen said the credit union "will keep all members up to date on the integration of our organizations through our website, newsletters and by mail." ...
- MERIDEN, Conn. (4/14/09)--Thirteen credit unions from Connecticut and 10 private businesses participated April 1 in a REAL Solutions Financial Reality Fair for area high schools, held at Central Connecticut State University. More than 200 students from eight high
schools went through the paces of making real world financial decisions as independent adults. Students such as those pictured here chose an occupation that interests them and researched their salary, then made living choices in areas such as housing, transportation, food and clothing, insurance, entertainment and other budget categories. "We feel strongly that we have a responsibility to provide financial education," said Andrew Klimkoski, president/CEO of Achieve Financial CU, Berlin, and chairman of the organizing committee. (Photo provided by the Credit Union League of Connecticut) ...
- HIGHTSTOWN, N.J. (4/14/09)--The New Jersey Credit Union Foundation has granted money to Junior Achievement (JA) to host a JA Day program at Abington Avenue School, Newark on May 28. The one-day event provides elementary school students with the five-lesson JA elementary curriculum, which teaches financial literacy to students. The foundation and JA are seeking credit union staff and volunteers to help bring the program to 10 classes of fourth and fifth graders. Volunteers will be assigned a class and will team up with a local JA staffer to teach the lessons, said the foundation ...
Market News
MADISON, Wis. (4/14/09)
- A Discover Financial Services report released last week indicates consumer confidence rose in March. However, those surveyed said they still plan to be conservative in their spending habits. Based on a survey of 15,000 adults, the Discover U.S. Spending Monitor increased 3.6 points to 79.5. The percentage of consumers who said they think the economy is getting better nearly doubled to 15% in March from 8% in February. Survey respondents with a negative outlook fell to 61% in March from 70% in February. March had the lowest percentage of negative outlook since October 2007. However, 28% of consumers surveyed in March said they expected to spend less, while 17% said they anticipated spending more, according to the survey (Investment News April 8) ...
- With government spending sparking bank profits, the Standard and Poor's (S&P) 500 Index could rise 17% to 1,000 in the next three months, according to investor Marc Faber. Banks in the S&P 500 are predicted to post an 86% decline in first-quarter earnings, according to analysts' estimates compiled by Bloomberg. Profits are projected to drop 57% in the second quarter, and 52% in the third quarter, before bouncing back 277% in the year's last quarter. Banks that announce first-quarter earnings can expect heightened scrutiny from investors and the government, with any downturn threatening the banking sector--which has recently rallied--into another tailspin, analysts said. This situation could not only be dire for the banking industry, but also for the entire country, analysts added (Bloomberg.com and American Banker April 13) ...
- Global business confidence remains quite weak, according to the Moody's Economy.com Survey of Business Confidence. Sales, hiring and equipment investment were particularly poor. Businesses are reporting minimal pricing power, the survey indicated. However, the fact that businesses are becoming less negative about the economy's prospects later this year is encouraging, analysts said. However, the global economy is afflicted with a severe full-blown synchronized recession from which it shows scant indications of recovering any time soon, according to the survey results (Moody's Economy.com April 13) ...
- Workers who are 45 years old and older constitute a disproportionate share of the long-term unemployed--those who have been out of work six months or longer, according to the Bureau of Labor Statistics. Laid-off workers in this age group were out of work--on average--22.2 weeks in 2008, compared with 16.2 weeks for younger workers. When workers age 45 and up finally find work, they usually experience a significantly steeper drop in wages than their younger counterparts, the bureau said. Conversely, older workers have some advantages; many avoided layoff in the current recession, and workers 45 and older currently have a lower unemployment rate than younger workers, government statistics indicated. Companies often do not want to lose the older workers' experience, according to Alicia H. Munnell, director of the Center for Retirement Research at Boston College. Also many of these workers have protections that often come with age and seniority, she added. In March, the unemployment rate for workers age 45 and over was 6.4%--the highest level since at least 1948, when the bureau began tracking unemployment statistics monthly (The New York Times April 13) ...
- The price of oil dipped below $50 per barrel Monday, as a result of the International Energy Agency (IEA) significantly reducing its forecast for oil demand--which offset the effect of data showing Chinese crude imports rising to their second-highest level ever. Friday, the IEA predicted world oil demand would drop by 2.4 million barrels per day this year, from 2008 demand as the fuel consumption contraction rate hit levels last seen in the early 1980s. Investment money had begun to ease back into commodities, and any sustained recovery on equities could continue to support the oil industry, analysts said. However, the oil industry remained cautious due to high inventories and the effect of the recession on fuel demand, analysts added (The New York Times April 13) ...
News of the Competition
MADISON, Wis. (4/14/09)
- Two banks--one in Colorado and one in North Carolina--closed down last week, pushing the total number of U.S. bank failures this year to 23. New Frontier Bank, Greeley, Colo., with $2 billion in assets and $1.5 billion in deposits, and Cape Fear Bank, Wilmington, N.C., with $492 million in assets and $403 in deposits, were shut down Friday by state regulators. The Federal Deposit Insurance Corp. (FDIC)--which was named receiver--allowed New Frontier depositors 30 days to transfer accounts. FDIC arranged to have Cape Fear's assets assumed by First Federal Savings and Loan Association, Charleston, S.C. (Bloomberg.com April 10) ...
- A federal judge in Los Angeles dismissed claims April 6 of insider training against all but one former Countrywide Financial executive. U.S. District Judge Maria Pfaelzer allowed allegations in a shareholders' lawsuit to remain against Angelo Mozillo--Countrywide's former chairman and CEO. The suit alleges Mozillo sold $478 million in shares from 2004 to 2008. Pfaelzer commented that some modifications made to Mozillo's automatic stock sale plan were unusual. However, the suit failed to support allegations that former CEO Stanford Kurland and other executives illegally traded stock, the judge added (The Mercury News April 9) ...
- With guidance from the Treasury Department, General Motors (GM) is preparing for a "surgical" bankruptcy filing by June 1, in spite of GM's public position that it could reorganize outside of court, sources familiar with the plans said last weekend. GM--granted $13.4 billion in federal aid--maintains that it needs a fast restructuring so its image and sales are not permanently hurt. Members of President Barack Obama's automotive task force conducted meetings and conference calls with GM officials and advisors in Detroit and Washington, D.C., last week, with talks expected to continue this week, analysts said. The preparations are to ensure a GM bankruptcy filing is ready if the company is unable to reach agreements with bondholders to exchange about $28 billion in debt into equity in GM and the United Automobile Workers union (The New York Times April 13) ...
- HSBC Holdings, the largest European bank, confirmed Monday that it was considering the sale of three of its major office buildings, adding that it had received interest from prospective buyers. HSBC said it might sell and lease back offices in London, New York and Paris. The bank is trying to raise $3.98 billion, according to London's Sunday Telegraph (Reuters April 14) ...
- Goldman Sachs Group Inc. has raised about $5.5 billion in capital commitments. The funds will be used to purchase private-equity assets on the secondary market from endowment and pensions that have been affected by losses. The GS Vintage Fund V--the company's fifth dedicated private equity secondary fund--will acquire investments with a value ranging from $1 million to more than $1 billion, Goldman Sachs said in a statement Monday. With financing remaining sparse for leveraged buyouts during the global credit crisis, investors are forming leveraged buyout funds--including pools dedicated to secondary interests, analysts said (Bloomberg.com April 13) ...
- Bill Gross, manager of Pacific Investment Management Co.'s (PIMCO) $144 billion Total Return Fund, increased his holdings of U.S. government debt to 28% in March--the highest percentage in nearly two years, according to the company's website--from 15% in February. The world's largest bond fund's holdings of mortgage-backed securities dropped to 66% of total assets in March from 86% in February. PIMCO spokesman Mark Porterfield said the firm doesn't comment on fund holdings (Bloomberg.com April 13) ...
Collections/Member Service audio conference soon
MADISON, Wis. (4/14/09)--The Credit Union National Association will offer an audio conference on collections and member service April 27 in addition to two audios this week on due diligence and account opening issues.
"Collections and Member Service--How Can They Work Together?" will start at 12 p.m. CDT. The hour-long audio will cover:
- How financial counseling can benefit members and a credit union;
- How to make collections a priority and why it should be a top priority;
- What collection resources are available;
- Three steps to create a stronger collection process;
- Three types of delinquencies; and
- Three keys to collections success.
"Vendor Due Diligence" will be offered today at 1 p.m. CDT. Topics in the audio include:
- Recent National Credit Union Administration guidance on evaluation of third-party relationships:
- Effective planning for third-party arrangements;
- Credit union-wide vendor-risk assessments;
- Basic contracting tips; and
- Creating solid staff oversight and quality control.
The audio offered Thursday, "Account Opening Issues: Signature Cards, Disclosures and Account Agreements" will begin at 1 p.m. CDT.
The audio will cover:
- Membership vs. account ownership;
- Signature cards;
- Disclosures; and
- When to update signature cards.
For more information, use the links.
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