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CURRENT Newsletter | 25 April 2014

Apr 25, 2014 by Lewis Wood

News and Information For and About Virginia's Credit Union System

Headline News

News About Credit Unions

Compliance/Regulatory Affairs News

Financial Services/Marketplace News

Education & Networking Opportunities

News From Credit Unions

Chapter News

League News

News About The Competition

Security/Fraud Prevention

Headline News 

Credit Unions Care Foundation Among Chief Sponsors of Anthem LemonAid Fundraiser

The Credit Unions Care Foundation of Virginia is proudly sponsoring the Anthem LemonAid fundraiser this year. LemonAid specifically seeks to raise funds to treat kids with cancer. The Children's Miracle Network Hospitals serving Richmond and Greater Hampton Roads are promoting the event.

As a sponsor, the Credit Unions Care Foundation logo will appear on the 200,000-plus cups that will be part of this year's campaign. This year's LemonAid dates are July 18-20, although you can choose a timeframe that works best for your credit union. Sign up today to host a physical or virtual LemonAid stand.
[LEARN MORE HERE – Richmond]
[LEARN MORE HERE – Hampton Roads]

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Sponsor Financial¢ents Program in Your Local Schools; Reach Next Generation of Members

Help bring money management into your local schools by sponsoring theFinancial¢entsprogram, a comprehensive, effective learning program to help students develop critical money management skills. This is a great way for your credit union to reach the next generation of members!
[LEARN MORE]

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League Representatives Meet with Congressmen

GAC Grassroots subcommittee member Alan Christopher attended Rep. Bob Goodlatte’s annual luncheon in Lynchburg on Monday on behalf of credit union constituents in the 6th Congressional District. Christopher created an opportunity to talk to Goodlatte before the program began, thanking him for introducing and successfully shepherding a bill in the House to fight patent trolls. Virginia Credit Union board member Roscoe Roberts met with Rep. Bobby Scott in his Richmond office on Monday.

They found common ground in their discussion of strong support for financial literacy; Scott sits on the House’s Financial Education Caucus. League President Rick Pillow and Senior Vice President David Miles joined Roberts at the meeting. They asked Scott to sign on to a letter being circulated by two Congressmen to the National Credit Union Administration, which raises credit union concerns about its Risk Based Capital proposal.

The League officials also discussed raising the cap on member business lending. Scott was non-committal on both issues. League staff also contacted each aide in Virginia’s House delegation asking if the Congressman in that office would sign the RBC letter to the NCUA.

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Rep. Connolly First to Sign onto RBC Letter!

We got word that Rep. Gerry Connolly (D-11) will sign the letter being circulated in the House that expresses concern about the National Credit Union Administration’s Risk Based Capital proposal. We had contacted the offices of all our House members and Connolly is the first one to respond back with a "yes." Please thank him for his support. You can call to say thank you (202- 225-1492) or email him.

Video of Chartway Director Lou Gull Urging Comments on RCB

Chartway Federal Credit Union's Lou Gull is urging those sending Risk Based Capital comment letters to the NCUA to copy their Congressman.
[VIEW THE VIDEO]

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Concerns Raised Over Affordable Housing Fee as GSE Bill Nears Vote

The Johnson-Crapo bill to overhaul the U.S. housing finance market has bipartisan support, but policy experts within those ranks differ on how the proposal can be improved. The proposal would wind down Fannie Mae and Freddie Mac and replace them with a new guarantor to backstop mortgage-backed securities.

A key point of contention is the 10-basis-point user fee that the proposed Federal Mortgage Insurance Corp. would charge to support the affordable housing efforts of the National Housing Trust, Capital Magnet, and Market Access funds.

"This 10-basis-point fee ain't nothing but a tax," declared Robert Couch, an attorney at the Bradley Arant Boult Cummings law firm and a member of the Bipartisan Policy Center's Housing Commission. "It's a regressive tax on homeowners … under the guise of access to credit, but it's not anything about access to credit," said Couch, who previously served as general counsel for the Department of Housing and Urban Development and president of Ginnie Mae in the George W. Bush administration.

Noting the proposed fee is significantly higher than the 4.2-basis-point fee created by the Housing and Economic Recovery Act of 2008 to support the National Housing Trust Fund (which the Federal Housing Finance Agency never imposed), Couch warned that homeowners will be priced out of the market. (American Banker Online, April 25)

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NCUA Passes Stress Test Rule; Results Will Not Be Public At First

NCUA approved a final rule on capital planning and stress testing at its board meeting Thursday that contained some changes — but maybe not enough to satisfy credit unions. The rule, which is projected to cost federally insured CUs $5 million in the first year, did not pass unanimously, with Republican board member Michael Fryzel the lone dissenting vote. Chairman Debbie Matz and Board member Richard Metsger, both democrats, voted in favor of the rule.

In October, NCUA proposed to require all federally insured credit unions with assets north of $10 billion to develop and maintain capital plans, and undergo annual stress tests. The proposed rule stated that the stress test results might be made public, but the final rule said the results will remain confidential for the first several years. The agency also adjusted the rule to possibly allow credit unions to do their own stress testing after three years. Third parties will be working with NCUA to conduct the initial stress tests. (Credit Union Journal, April 24)

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News About Credit Unions

NCUF, Filene Non-Prime Auto Loan Program Gives Hope on Wheels

The National Credit Union Foundation (NCUF), in partnership with Filene Research Institute, announced this week that a product incubator for its Non-Prime Auto Loans is full, with 14 credit unions across the country participating, including Roanoke, Va.-based Freedom First. Non-Prime Auto Loans, an NCUF product, is one of five products in the Filene Research Institute's accessible financial services incubator funded by the Ford Foundation. [READ MORE]

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Hampel: Economy, Loan Growth ‘Pretty Decent’

As the weather-induced economic slowdown recedes, the economy will gradually pick up steam for the rest of year, says Bill Hampel, CUNA’s chief economist and senior vice president. This growth won’t be “fantastic,” he says, “but within the next couple months we’ll probably have as many people working as there were before the recession.”

Overall, “the economy looks pretty decent.” Hampel offered these insights during CUNA’s Pressing Economic Issues Series (PEIS) in April. This resource provides monthly 30-minute updates on current economic issues and hot topics affecting credit unions. [READ MORE]

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Nonprofit Develops Financial Reporting System for CDFIs

Though some banks feel hassled by financial reporting requirements, at least one industry views such reports favorably. CARS Inc., a nonprofit that provides data, analysis and advisory services to community development financial institutions, is planning to launch a reporting system similar to call reports. CARS hopes making financial data easily accessible will entice investors to give CDFIs a second look.

"I think this is a turning point for" CDFIs, says Brandee McHale, chief operating officer at the Citi Foundation, which provided the lead philanthropic funds for the reporting system and is a longtime CDFI supporter. "This is taking it to the next level." CDFI loan funds are unregulated, and investors often struggle to gain timely and accurate data, says Paige Chapel, president and chief executive of CARS. The nonprofit provides ratings for such funds to make research easier for investors, including banks looking for credit under the Community Reinvestment Act. (American Banker Online, April 15)

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Compliance/Regulatory Affairs News

NCUA Proposes to Curb Abusive Associational Common Bond Practices

The National Credit Union Administration (NCUA) Board has issued a proposed rule to amend its associational common bond. NCUA wrote: "In an attempt to expand their potential FOMs beyond appropriate limits, however, a few FCUs have begun forming their own associations and adding independent associations to their FOMs that may not fully satisfy the intent of the associational common bond rules." The NCUA board has proposed to clamp down on associations formed for the primary purpose of expanding FCU membership. [READ THE PROPOSED RULE]

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Senate Banking Committee Sets McWatters Vote

The Senate Banking Committee will meet in executive session April 29 to vote on the nomination of Mark McWatters to the NCUA Board. Along with McWatters, the committee will vote on three Federal Reserve Board nominees and two Department of Housing and Urban Development nominees. Following approval by the committee, the full Senate would consider the nominees for confirmation. (Credit Union Times, April 25)

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CFPB Likely to Ease Rules on Fees for QM Loans

Bankers, mortgage lenders and real estate brokerage firms are expected to win some relief soon from a provision of the "qualified mortgage" rule that restricts fees paid to affiliates. Under the Consumer Financial Protection Bureau's regulation, all such fees are included in a points and fees test that says they cannot exceed 3% of the loan amount and still qualify for QM status.

But observers said the CFPB appears likely to ease its interpretation of affiliated fees, allowing transactions that are passed through an affiliate to a third party provider to be excluded from the test. (American Banker Online, April 23)

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Financial Services/Marketplace News

Banks Add Mobile Money Management to Attract Millennials

What's the difference between personal financial management tools and mobile banking? Increasingly, there is none. Bankers have long hesitated to offer smartphone-based financial advice tools, such as savings goal meters and budget monitors. Instead, the conventional wisdom has been that, beyond customer alerts, the wise move is to avoid cluttering with PFM features a device as short on real estate as a mobile phone.

The qualms are based on a number of uncertainties: whether mobile phones have the necessary number-crunching power to run PFM functions quickly; whether the features would offer value if customers failed to keep tasks like budgeting up to date; and whether there's even a market for such tools, given that online banking PFM adoption rates are generally in the single digits.

In recent weeks, avoidance has been evolving into acceptance among a handful of financial services companies that are targeting millennials. Central Bancompany in Missouri and fintech giant FIS, for instance, have introduced mobile phone-based software that lets consumers tag transactions or set aside funds for a goal — features typically associated with PFM. The services work by connecting a mobile app to a bank account or prepaid card. These financial services companies are attempting to defend their turf against quasi-banks, such as BBVA's Simple and Moven, which are already far down this road.

To do so, they're trying to create experiences in which PFM fades into the background the same way Uber makes payments fade away for people hailing cabs. For such breezy customer experiences to catch on, they must require little mental math, provide shopping advice (Can I afford that brunch today?), and occur within an existing mobile banking app. Young consumers have grown up expecting no less. (American Banker Online, April 16)

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US Consumer Sentiment Soars to Nine Month High

U.S. consumer sentiment rose in April to a nine-month high as views on current and near-term conditions surged, a survey released on Friday showed. The Thomson Reuters/University of Michigan's final April reading on the overall index of consumer sentiment came in at 84.1, beating an expectation of 83.0 in a Reuters survey and up from 80.0 the month before.

The preliminary April reading was 82.6. The headline number was the highest reading since July 2013. [READ MORE]
[RELATED: Middle Class and Living Paycheck to Paycheck]

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Sales of New US Homes Plunge 14.5 percent in March

The number of Americans buying new homes plummeted in March to the slowest pace in eight months, a sign that real estate's spring buying season is off to a weak start. The Commerce Department said Wednesday that sales of new homes declined 14.5 percent last month to a seasonally adjusted annual rate of 384,000.

That was the second straight monthly decline and the lowest rate since July 2013. Sales plunged in the Midwest, South and West in March. But they rebounded in the Northeast, where snowstorms in previous months curtailed purchases. New-home sales have declined 13.3 percent over the past 12 months. "Our core view is that the housing market has stalled and won't contribute" to overall economic growth this year, said Ian Shepherdson, chief economist at Pantheon Macroeconomics. [READ MORE]

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There’s a Dangerous New Way to Get a Quick Loan

Lingering fallout from the Great Recession includes the high rate at which workers with a 401(k) plan borrow from that pool of savings, imperiling their future retirement security. At the end of last year, 18.2% of participants in a defined contribution plan had loans from their plan outstanding, according to new data from the Investment Company Institute. That rate has held above 18% since 2010, having jumped from 15.3% in 2008. More workers also have taken hardship withdrawals since the financial crisis, further evidence that some at least have come to view their 401(k) plan as a piggy bank—not a retirement account. [READ MORE]

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CFPB Digitizing Mortgage Closing

The CFPB is launching a pilot program to evaluate “eClosing” solutions and how they can improve the mortgage loan closing process. “Our goal will be to determine how the eClosing process can be made to reflect the spirit of our Know Before You Owe rule by generating increased consumer understanding, fewer surprises at the closing table, and a more empowered consumer,” said CFPB Director Cordray on Wednesday during a forum held at the CFPB headquarters in Washington.

“This is not a rulemaking process. Instead it is a potential ‘win-win’ effort to work with all stakeholders to ensure that consumers understand the commitment they are making and experience a more transparent, efficient, and effective process,” he added. “The bureau hypothesizes that technology-enabled electronic closing (eClosing) solutions may have the potential to improve consumer understanding and empowerment and efficiency for all involved,” said the CFPB’s eClosing pilot guidelines. [READ MORE]

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Education & Networking Opportunities

Payments Workshop Slated for May 21

Make plans to attend the Payments Workshop, May 21, in Richmond. Sessions include The Branch of the Future, The Future of Credit Union Payments, and ACH Rule Changes.
[REGISTER ONLINE]
[LEARN MORE HERE]

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Free Seminars on Shaping Your Loan Portfolio Available

The economy has begun to stabilize in many areas, but credit unions are still feeling the impact of the financial crisis both directly through non-performing loans and indirectly through regulatory pressure to understand the concentrations of risk that could be hiding in their loan portfolios.

These sessions will explore methods to uncover risks and opportunities within your loan portfolio using data analytics. Location: June 24 - Department of the Interior (Kiowa Room, Basement Level) (1849 C Street NW, Washington D.C. 20240). June 23 – Maryland & D.C. Credit Union Association (Columbia, Md.) Seminar starts at 9:45 a.m. both dates. Contact Interior Federal Credit Union's Bill Kennedy to register – bkennedy@doifcu.org.
[LEARN MORE]

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News From Credit Unions

Langley Federal Credit Union Donates $5,000 to Support Community Clinic

Langley Federal Credit Union presented a check in the amount of $5,000 to Lackey Free Clinic for support of their mission to provide medical, dental and surgical care to uninsured, indigent patients at no cost. [READ MORE]

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CU Magazine Wants Your Vote for CU Hero

Voting for Credit Union Magazine 's 2014 Credit Union Hero of the Year is open until May 1. The annual award honors individuals who exemplify the "people helping people" philosophy and who have gone above and beyond to expand credit union services in their communities. Candidates are nominated by Credit Union Magazine readers, and this year, our own Dan Morrisey (Queen of Peace Arlington Federal Credit Union) is among the nominees. [READ MORE]

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Belvoir Federal Supports Month of the Military Child on Fort Belvoir

Belvoir Federal Credit Union helped support the Month of the Military Child (MOMC) Celebration throughout the month of April on Fort Belvoir. The MOMC honors the sacrifices made by military children during their parent’s deployments, relocations, and other military-related activities. The month of celebration has several events for the children and their families hosted by the Fort Belvoir Directorate of Family and Morale, Welfare and Recreation (DFMWR) and Child, Youth, and School Services (CYSS). [READ MORE]

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Belvoir Federal COO Invited to Attend Executive Advisory Panel

Belvoir Federal Credit Union’s Chief Operating Officer (COO) Patricia Wallace was selected to attend IWS Executive Advisory Panel (EAP), which is made up of 10 – 12 credit union executives from across the country. The EAP featured professionally moderated working sessions, discussion on being a more effective leader, and recreation options for the panel to review. [READ MORE]

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Belvoir Federal’s Fraud Analyst Earns CFE Certification

Belvoir Federal Credit Union’s Fraud Analyst, Mike McDaniel, has successfully met the Association of Certified Fraud Examiners (ACFE) character, experience, and education requirements for the Certified Fraud Examiner (CFE) credential. [READ MORE]

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Chapter News

NoVA Chapter Meets May 8

Attorney Jeffrey Larroca will deliver a program on "Trends and Developments in Employment Law" at the NoVA Chapter's May meeting. Location: Hyatt Fairfax at Fair Lakes. Time: 5:30 p.m. networking; 6 p.m. meeting. [LEARN MORE]

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Tidewater Chapter to Meet May 8

Tate Felt will offer a presentation on picking the right college at the Tidewater Chapter's May 8 meeting. The Chapter will also present the Jack E. O'Connor scholarships to deserving high school students. Location: Greenbrier Country Club (Chesapeake). Time: 6 p.m. social and 6:30 p.m. dinner. [LEARN MORE]

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Tidewater Chapter Hosting 2nd Annual Charity Golf Challenge

Join the Tidewater Chapter Sept. 18 for its 2nd Annual Golf Challenge at Sewells Point Golf Course in Norfolk! Format will be four-man captain’s choice, with an entry fee of $125 per player. Cost includes a continental breakfast, cart and greens fees, range balls, and cookout lunch. Shotgun start at 8 a.m. Proceeds will benefit Children’s Miracle Network Hospital. Sponsorships are also available, ranging from $250 to $1,000. Sponsorships open to credit unions and business partners!

Sponsorship opportunities available: Be a Part of This Exciting Event!
Click the link below to learn more! 

We Need Door Prizes! Can you donate items? Learn more about this opportunity!

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League News

Please Provide Info on Makeup of Your Board of Directors

We are looking to update our records and assist a credit union looking for information concerning your Board of Directors. We would like to hear from each credit union.

If you would please click on the link below and complete the survey. We would appreciate your participation! [TAKE THE SURVEY]

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News About The Competition

How FDIC Is Nudging Banks to Reach Underserved

The issue of serving so-called "underbanked" borrowers has taken on a new urgency since regulators began cracking down on payday and certain other low-dollar, high-interest loans, prompting fears of a credit crunch for low-income consumers. Even as the Consumer Financial Protection Bureau writes new rules for payday loans and the Justice Department continues "Operation Choke Point," which is designed to force institutions to sever relationships with online lenders, regulators are trying to create and promote safer, viable alternatives that can expand access to the banking system.

The Federal Deposit Insurance Corp. convened an advisory panel for the 20th time on Thursday focused on exploring ways to reduce the number of unbanked and underbanked borrowers. Following the committee's earlier studies on bank-offered small-dollar loans and safe transaction accounts, officials presented a new paper exploring how the use of mobile phones could broaden banking access. They also announced a joint financial literacy initiative with the CFPB to expand the FDIC's well-established Money Smart education program. (American Banker Online, April 25)

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Security/Fraud Prevention

Little Credit Union Uncovers Massive Tax Fraud

Until federal agents received a tip from a tiny credit union in Western Pennsylvania, the Internal Revenue Service was apparently unaware of what federal prosecutors are calling a "massive" fraudulent tax refund scheme that went on for years.

The five men indicted on fraud charges in the case probably believed they were safe using fake identities to open accounts at Widget Financial Credit Union in Erie, Pennsylvania. But a sharp-eyed Widget employee noticed that the credit union was receiving multiple out-of-state account applications using similar personal information, and mentioned the suspicious activity to a supervisor.

According to Credit Union Journal, that tip led to a phone call with the FBI, and the discovery of a multi-yearlong tax fraud scam involving thousands of fake tax returns filed with the stolen personal financial information of people from all over the country. [READ MORE]

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Heartbleed Bug Lurks Beyond Websites

The Heartbleed security flaw, characterized by its cool logo, has been almost impossible to ignore for the past two weeks, as traditional and social media have breathlessly reported that it could infect as many as two-thirds of all websites. Most banks have checked their web sites to make sure they're not using a type of server security software that's vulnerable to hackers. Many have confirmed that they don't use the particular software, OpenSSL, on their websites, and may have breathed a huge sigh of relief as a result.

But Heartbleed may be lurking in other parts of banks' infrastructures. Network devices, servers not serving websites, mobile apps and mobile devices all could be vulnerable.

Cisco and Juniper, for instance, have both acknowledged that some of their network equipment use the versions of OpenSSL in question.

"Everyone is thinking of Heartbleed in the context of websites," says Chris Novak, global managing principal of the risk team at Verizon. "While that is probably the most obvious place, it's also the place most people are remediating. You've got firewalls, routers, switches, and VPN endpoints that a lot of organizations are forgetting about."

Bank security executives declined to comment on this aspect of the Heartbleed risk, but observers say it's conceivable that hackers could break into other devices, servers and apps and steal customers' online and mobile banking credentials, which they could then use to commit financial fraud. (American Banker Online, April 21)

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