GA Update - December 2008
Financial Literacy Bill Signed Into Law
With the support of the MCUL, State Sen. Michael Switalkski (D-Roseville) introduced SB 834, a bill to permit a financial literacy course to be among the courses which satisfy the high school math curriculum requirements. The bill was signed into law by the Governor on Dec. 19. A 2007 back-to-school cardholder survey from Visa revealed that only 5 percent of adults learned about the vital life skill of money management in elementary or high school. The survey also showed that less than half of respondents learned about money management from their parents, while 41 percent were self-taught or learned as they went. To see the text of the legislation, please click here.
House Passes Small Claims Bill in Wee Hours
Early in the morning on Dec. 19, the House passed Senate Bill (SB) 786, introduced by Sen. Wayne Kuipers (R-Holland). The Senate immediately concurred and ordered the bill enrolled. As passed, the bill will raise the small claims monetary ceiling to $4,000 beginning on July 1, 2009; $4,500 on July 1, 2010; and finally $5,000 on July 1, 2011. While SB 786 originally passed the Senate at $5,000, this compromise was reached between the House leadership and Sen. Kuipers to advance the bill. For more information, please click here.
2009 CUNA CAC Scholarships Available
Warm weather may seem like a distant memory, but money brought in through the CURE Defense Fund's Annual Golf Outing in July may bring a bit of the sunshine back when credit unions sign up for grassroots lobbying events. The CURE Defense Fund Board of Trustees has allocated 100 percent of the funds generated from the CURE Golf Outing toward scholarship opportunities for credit unions interested in grassroots advocacy programs, such as the 2009 CUNA Governmental Affairs Conference (GAC). Thanks to the support of credit unions and vendors, $16,598 (net) was raised at this year’s Golf Outing to fund scholarship opportunities in 2009. The scholarship program is designed to provide financial assistance to credit unions whose staff would otherwise be unable to attend these events; therefore, preference will be given to first-time attendees and individuals demonstrating financial need. The 2009 CUNA GAC is scheduled for Feb. 22-26 at the Washington Convention Center in Washington, D.C., and the CURE Defense Fund Board of Trustees has allocated $12,500 to specifically fund scholarships to this event. A full scholarship will cover conference registration, hotel accommodations for four nights, and roundtrip airfare for up to $2,500. In order to qualify, a participant’s credit union must have raised 100 percent of either their 2007 or 2008 Federal and State PAC goals. Click here for the scholarship application. Questions may be directed to MCUL Executive Vice President Patrick La Pine at ext. 485 or via e-mail at Patrick.LaPine@mcul.org. For more information on the CUNA GAC, including a list of FAQs and a tentative schedule, please click here.
Changed Scope of Home Foreclosure Prevention Bills
The Michigan State Senate has been reviewing bills passed by the House dealing with subprime loans. The bill as originally introduced seeks to provide some relief to homeowners who have subprime loans by allowing the OFIR commissioner to review these loans prior to foreclosure. The commissioner would be able to delay foreclosure in some instances and order the lender and borrower to mediation in an attempt to work out the terms of the loan. In the House, the MCUL supported that package of legislation while raising some questions. The support was largely based on how the bill dealt with subprime loans within a fixed time period. The Senate, however, has a version of the bill which takes the issue in a different direction. The newest language for HB 6615 now provides that 21 days prior to foreclosure, lenders shall send a notice with information to MSHDA about the foreclosure. MSHDA will then send that notice to the borrower in an attempt to have them contact the lender to discuss the terms of the loan. Foreclosure could then be delayed for 51 days while discussions are taking place. The MCUL opposes this version of the bill, because it assumes that lenders are not already making an effort to work out arrangements to avoid foreclosure. Delaying this for borrowers who have no intention to pay may only serve to put a financial institution in a worse position. In addition, while the version of HB 6615 passed by the House allowed the OFIR commissioner to examine the capability and willingness of the borrower to stay in the home before determining which subprime loans could possibly avoid foreclosure, the bill now applies to all loans that are being foreclosed on. The MCUL will work to keep members up to date on the latest developments with this legislation as the Senate continues to work out details before final passage. For more information, please click here.
PAC Fundraising Strong as Year-End Nears
As fundraising activities draw to a close for 2008, both the state and federal PACS are ending the year on a strong note. The MCULAF (state) PAC had raised $156,995 or 105 percent of its goal as of Dec.8. The MCULLAF (federal) PAC had raised $238,471 or 87 percent of its goal as of that date. As 2008 ends, the MCUL and MCULAF/MCULLAF Board of Trustees thank all credit unions that participated in PAC fundraising. Look for information on 2009 lapel pins to be distributed soon.
Alpena Alcona Area CU Sells Winning 2008 Grand Raffle Ticket
The winner of this year’s MCULLAF Grand Raffle, ticket number 27640 sold by Alpena Alcona Area CU, will receive either a new 2008 Chevy Malibu or $20,000 in cash. The raffle brought in $128,525, almost $4,000 more than last year. This was the most raised in its 17-year history. Proceeds from the MCULLAF Grand Raffle support federal legislative advocacy for Michigan’s credit unions. “The Grand Raffle had another very successful year, and we’re thankful to the 130 credit unions that participated,” said MCULLAF/MCULAF Chairman Howard Spencer. “Next year we’d like to bump credit union participation up even further. If every MCUL member credit union sold just 100 tickets, it would raise $155,500 and top our grand total this year by nearly $27,000.”
OFIR Town Hall Meetings
OFIR Commissioner Ken Ross conducted two town hall style meetings with Michigan credit unions on Dec. 3. The morning session was hosted by Community Choice CU in Farmington Hills, and the afternoon session in Grand Rapids was hosted by Option 1 CU. Approximately 75 credit union officials attended and voiced their questions and comments on a variety of subjects ranging from Treasury’s regulatory restructuring proposal to foreclosures and workouts to laptop security. The commissioner brought with him his new chief deputy commissioner, Mr. Steve Hilker. End of session comments from Ken Ross are available on the MCUL website under CUBE TV.
Governor Announces CD Stimulus Program
In a move to help stimulate lending to consumers and businesses, the Governor has announced a new program to invest state money in financial institutions located in Michigan. Banks and credit unions would be eligible to participate. The state would invest in certificates of deposits of 6 or 12 months duration at below market rates, with a minimum offer of $100,000 and a maximum offer of $10,000,000 per institution. The program goal is to prudently lend up to 80% of the funds to Michigan businesses and consumers. The money will be available December 8, 2008 and the program will remain open until February 6, 2009. The Michigan Department of Treasury, Bureau of Investments, will make funds available in accordance with guidelines posted Dec. 5. Sue Kohagen at the Bureau of investments is the primary contact and can be reached at (517) 373-8161. Click here for more information from the Treasury Web site including program guidelines.
NCUA Board Approves 12-Month Exam Cycle
At its November 20th board meeting, NCUA announced it would be contracting the current 18-month exam cycle to 12 months. NCUA felt that 2009 would be a challenging year and expects the adverse economic conditions to potentially put credit unions at a greater risk of loss. Thus it felt it needed to be more proactive in obtaining more timely qualitative and quantitative data in order to recognize and resolve any sudden turn in a credit union’s performance. Therefore for FCUs, a risk focused examination or a material on-site supervision contact will be required for every 12 months based on risks being observed within a target cycle of 10-14 months. For federally insured state chartered credit unions, NCUA will monitor all CAMEL coded 3 and 4 credit unions, negatively trending credit unions, and credit unions with a high risk profile. As appropriate and required, an on-site insurance review will be conducted within a target cycle of 10-14 months. The focus will be on those States where market dislocations are the greatest. The NCUA will consult and work with the State regulators in coordinating insurance reviews. To implement this program the equivalent of 50 full time employees will be hired during 2009. A copy of the board memorandum can be found by clicking here.
OREO Accounting Guidance and Secured Snowmobile Registration Summary Posted on InfoSight
The topic of the four November issues of the weekly InfoSight newsletter describing accounting guidance for OREO property is now available on InfoSight. The guidelines drafted by OFIR for dissemination by MCUL, and strongly supported by The Mortgage Center, are also posted. This informal guidance is intended to assist credit unions in understanding essential accounting requirements as a foreclosed loan moves through the acquisition phase, the holding phase and the disposition phase. The state has a new law requiring the placement of lienholder information on a registration certificate for snowmobiles. The goal is to preserve the interests of the lender as snowmobiles are sold similar to the process for car titles. The new law will go into effect as of May 1, 2009. Information regarding both topics is available on MCUL’s password protected InfoSight’s Loan and Leasing Channel by clicking here.
Red Flag Enforcement Deadline Extended for SCUs
The original Red Flag Rule compliance deadline of Nov. 1 has come and gone, but for state chartered credit unions, mandatory compliance was extended by order of the Federal Trade Commission (FTC) and supported by OFIR. Many of the entities regulated by the FTC on this particular topic complained of not knowing that they were subject to the rule, and felt overwhelmed of the approaching deadline. State chartered credit unions are one of the entities the FTC regulates and OFIR announced they would honor the extension date of May 1, 2009. However, federal credit unions were advised by NCUA that they would adhere to the original deadline and would evaluate a federal credit union's red flag and identity theft program during the normal examination process. If not fully implemented at the time of the examination, examiners would assess any progress and the general willingness to be in compliance. The NCUA position was outlined in an NCUA legal opinion letter addressed to CUNA CEO, Dan Mica.
FINAL RULES
The Low-Income Designation – NCUA Parts 701 & 708
NCUA amended the definition of “low-income members” to use median family income (MFI) to determine if a credit union qualifies for a low-income designation and eligible for assistance from the Community Development Revolving Loan Fund (CDLRF). Under the final rule, in order for an FCU to qualify as a low-income credit union (LICU), a majority of its actual members must meet the definition of “low-income” (or 80% of the metropolitan area MFI or less, using U.S. Census Bureau information). In some cases, median earnings for individuals may be substituted for MFI, and non-metropolitan area MFI data will be used when a member lives outside a metropolitan area. The final rule clarifies that a regional director will notify that an FCU will, or no longer, qualifies for a low-income designation. The final rule does not require state supervisory authorities to change the process or procedures currently used for federally-insured credit unions to receive the LICU designation from state regulators. This rule is effective on January 1, 2009 and can be read in its entirety at: http://www.ncua.gov/RegulationsOpinionsLaws/RecentFinalRegs/f-701-34%20web.pdf.
Organization and Operations of Federal Credit Unions; Underserved Areas
NCUA adopted four amendments to its Chartering and Field of Membership Manual to update and clarify the process of approving federal credit union service to “underserved areas.” First, federal credit unions must establish that an “underserved area” qualifies as a local community. Second, the economic distress criteria for determining whether a community is an investment area has been amended to conform with the criteria used by the Community Development Financial Institutions (CDFI) Fund. Third, federal credit unions must include a one-page section of its business plan entitled “Significant Unmet Needs for Credit Union Services.” Finally, NCUA will use its own data on the location of depository institution facilities to determine whether and area is “underserved by other depository institutions’ according to the presence of their facilities within the area. The final rule grandfathers the federal credit unions already serving underserved areas, but not the underserved areas themselves. This rule is effective on Jan. 2, 2009 and can be read in its entirety at: http://www.ncua.gov/RegulationsOpinionsLaws/RecentFinalRegs/73-FR-73392_12-2-08.pdf.
Prompt Corrective Action; Amended Definition of Post-Merger Net Worth – NCUA Parts 702 and 704
This final rule expands the prompt corrective action (PCA) definition of a federally-insured natural person credit union’s net worth to allow an acquiring credit union to combine the merging credit union’s retained earnings with its own to determine the acquirer’s post merger net worth. Though corporate credit unions are exempt from PCA, the final rule’s amendments are consistent for corporate credit unions as well. This amendment is limited to PCA measurements, and would not apply to other types of financial reporting. This rule applies to federally-insured credit union mergers that take place after Dec. 31, 2008 that are subject to financial reporting under Financial Accounting Statement No. 141(R), Business Combinations (2007) and can be read in its entirety at: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/Prompt%20Corrective%20Action%20Amended%20Definition%20of%20Post%20Merger%20Net%20Worth.pdf.
NCUA Regulatory Alerts
No. 08-RA-08: Regulation D Amendments
This Alert advises federally-insured credit unions of the recent amendments to Regulation D. These amendments reflect the annual indexing of the reserve requirement amounts for 2009. This Alert is available at: http://www.ncua.gov/reg_alerts/2008/08-RA-08.pdf.
NCUA Proposed Regulations
NCUA and the other federal financial institution regulators (agencies) have issued a proposed Interagency Appraisal and Evaluation Guidelines that outline supervisory expectations for sound real estate appraisal and evaluation practices. This includes formal appraisals, as well as other evaluation methods that are permitted under certain circumstances. The Guidelines are intended to clarify and provide more details on appropriate risk management principles and internal controls for ensuring that real estate appraisals and other evaluations are reliable and support the real estate transactions. Comments are due by Jan. 20, 2009. The proposed Guidelines can be read in their entirety at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081113a1.pdf.
NCUA Letters to Credit Unions
- None in this time period -
NCUA Legal Opinion of Interest
08-0731: Prepayment Penalty in the Member Business Loans (MBL) Context [Posted November 12, 2008]
The question in this opinion is whether a federal credit union (FCU) may recoup waived settlement costs and fees associated with an MBL without that being considered a prohibited prepayment penalty. NCUA answered “Yes,” so as long as the recoupment period is reasonable in terms of the size and type of fees being waived. The Opinion referenced a previously issued Legal Opinion Letter 93-0206 that held a conditional waiver program of appraisal and title fees did not violate the prohibition against prepayment penalties. The current Opinion can be found at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0731.pdf.
OFAC Updates SDN List
Credit unions are reminded that the OFAC SDN lists have been updated through Nov. 30, 2008 with changes, new entries and removals primarily from Iran, Columbia, Venezuela, Mexico, Libya and the United Kingdom. The full 2008 listing can be found at: http://www.ustreas.gov/offices/enforcement/ofac/sdn/t11sdnew.pdf.
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