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CURRENT Newsletter | 8 May 2020

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Advocacy / Governmental Affairs

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Economic / Financial Services News

Headline News

League Conference Call May 13: Updates on HR, Employment Law Issues

We are again partnering with the Woods Rogers law firm for a conference call detailing HR and employment law updates. The conference call will take place May 13 at 11 a.m. Attorneys Dan Summerlin and Tom Winn will provide updates on state and federal issues, paying particular attention to the Virginia employment laws signed by Gov. Northam last month. What do these new laws mean for your credit union and when are they effective? They’ll also answer your questions.


After registering, you will receive an email with call instructions.

League Virtual Call May 20: Managing Pandemic-Related Collections, Bankruptcy Matters

Join our virtual call May 20 with attorney Eddie Whitlock on collections, bankruptcy and court system issues related to the pandemic. The presentation will cover key issues such as foreclosures, repossessions, late payments, modifications and more. We’ll also cover the anticipated uptick in bankruptcies.


You will receive an email with meeting the meeting link and instructions after registering.

Save the Date: May 21 Webinar on Managing Risk as CUs ‘Reopen’

Member credit unions are invited to join a free webinar, featuring CUNA Mutual Group’s Senior Risk Management Consultant Carlos Molina, who will discuss the operational impacts credit unions will face as they reopen lobbies and begin to bring staff back to the office. We’ve tentatively set the “What Employers Need to Know as Employees Return to Work” webinar for May 21, 10 a.m., but stay tuned for additional details.

IRS Updates Economic Impact Payment FAQs, Clarifies Returning Deceased Persons' Payments

Millions of Americans have already received their Economic Impact Payments (Payments) authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Internal Revenue Service (IRS) automatically sent payments to most eligible individuals through direct deposit, with another round of stimulus payments arriving in recipients' mailboxes.

However, many of these payments, based on 2018 or 2019 tax returns, were issued to deceased persons. Financial institutions looking for guidance on how to handle these directly deposited impact payments, or when presented with a check, can look to the IRS’ recently updated frequently asked questions and answers for impact payment recipients.

Here’s what changed:

  • deceased individuals (Q10),
  • resident and non-resident aliens (Q11),
  • incarcerated individuals (Q12), and
  • returning Economic Impact Payments (Q41)

Military Personnel Now Included in LICU Designation, NCUA Announces

NCUA Chairman Rodney Hood announced Thursday that military personnel will now be able to count toward a credit union earning the Low-Income Credit Union (LICU) designation. CUNA requested this change in its engagement with NCUA, most recently in a letter sent to Hood in March.

The LICU designation means low-income members comprise more than 50% of a federal credit union’s membership, and entitles the credit union to certain statutory benefits, including being able to accept non-member deposits from any source, offering secondary capital accounts, member business lending exemptions and the ability to apply for grants and low-interest loans from NCUA.


PPP Safe Harbor Extended to May 14

Borrowers now have until May 14, 2020, to decide whether to return Paycheck Protection Program (PPP) funds within a safe harbor period provided by the U.S. Small Business Administration (SBA).

The SBA released FAQ 43 on May 5, just two days prior to the initial May 7 deadline, stating that the safe harbor period would be automatically extended for all borrowers to May 14.


Advocacy / Governmental Affairs

CUNA/Leagues Continues Advocacy as Work Continues on Phase 4 Legislation

CUNA Chief Advocacy Officer Ryan Donovan highlighted NCUA Chairman Rodney Hood’s engagement on several CUNA priorities in letters to the Financial Accounting Standards Board (FASB) and Sen. Mike Crapo (R-Idaho), chairman of the Senate Banking Committee for this week's Advocacy Update video.

Hood called on FASB to exempt credit unions from the current expected credit loss (CECL) standard and encouraged Crapo and his colleagues to take actions to reduce credit union regulatory burdens, particularly during the coronavirus disease (COVID-19) pandemic.

"Each of these items are issues on which CUNA and the Leagues have advocated," Donovan said. “We appreciate NCUA listening to the case that we’ve made in taking this action, and hope Congress and FASB will follow through as well."

The Senate is in session this week, and work has resumed on the fourth phase of COVID-19 relief legislation. CUNA President/CEO Jim Nussle participated in a call with House Financial Services Committee leaders last week as part of this process.


Bill Would Exempt COVID-19 MBLs from Cap for One Year

Reps. Brad Sherman (D-Calif.) introduced a bill Friday to exempt credit union business loans related to the pandemic from the member business lending cap for one year.

The House is expected to return to session as early as next week to continue work on the next phase of COVID-19 relief legislation, and CUNA and Leagues have called for such an MBL exemption to be included in the package.


Massive Drop in Car Sales Sparks New Push in Congress to Aid Auto Industry

A precipitous decline in car sales amid the deadly coronavirus outbreak has caught the attention of Capitol Hill, where some lawmakers are now urging Congress to authorize new aid for the auto industry.

With consumers spending less, and factories nationwide shuttered or severely hamstrung, Democrats and Republicans largely representing the hard-hit, auto heavy-Midwest are leading an early push to persuade their colleagues to help manufacturers and suppliers as part of a future pandemic relief package. Absent that assistance, they warn that massive losses could leave workers unemployed and stall any economic recovery.

To make their case, lawmakers including Reps. Marcy Kaptur (D-Ohio), Debbie Dingell (D-Mich.) and Fred Upton (R-Mich.) began circulating a draft letter Tuesday emphasizing that the “projected economic fallout for the industry is grave,” according to a copy obtained by The Washington Post. (Washington Post, May 6)

[RELATED: Economic Aid for Millennials: Stimulus Checks, Student Loan Relief and More]

Coronavirus Prompts Renewed Calls for Postal Banking, Faster Payments

Federal efforts to provide stimulus checks to Americans hit by the coronavirus' economic fallout have revived calls for better government-backed financial delivery systems.

Millions of households haven't received their $1,200 payments nearly a month and a half after Congress authorized them. That has led some progressives and other observers to demand reforms to improve underbanked consumers' access to the financial system, such as authorizing the U.S. Postal Service to provide financial services or creating a Federal Reserve-backed digital wallet. Some have even lamented the slow pace of the Fed's implementation of a real-time payments network.


(Credit Union Journal subscription may be required.)

Compliance / Regulatory Issues

CUNA Announces Free New Cybersecurity Roundtables for May

CUNA is hosting three free cybersecurity roundtable webinars. These webinars, facilitated by CUNA and NASCUS, connect credit union professionals for discussion on ways to solve shared cybersecurity challenges caused by the COVID-19 pandemic.

These new roundtable webinars are tailored to credit union asset classes to connect cybersecurity professionals with peers who are likely facing similar issues and needs. The topics explored during these new roundtables are chosen by participants to give attendees the chance to address the questions that matter to them. These webinars are free to CUNA and NASCUS members and space is limited, so register today.

Choose the session based on your credit union’s asset size. Cybersecurity Roundtable: The COVID-19 pandemic & credit unions

  • CUs less than or equal to $120M webinar (recorded)
  • CUs between $120 and $500M webinar (Live May 12, 2020 or recorded)
  • CUs greater than $500M webinar (Live May 19, 2020 or recorded)


NCUA Examiners Contacting FCUs Through May 18 on Credit Risks

NCUA examiners will contact federal credit unions between now and May 18 to review a list of questions sent in an agency Letter to Credit Unions (20-CU-12) recently. According to NCUA, this is the next phase of credit union outreach to understand challenges faced by credit unions due to the coronavirus disease (COVID-19) pandemic, focusing on potential emerging credit risks.

“Many of the questions ask for your best estimates only; we do not anticipate significant research will be necessary. As with all interactions with the NCUA, I encourage you to have an open dialogue with your examiner, ask questions, and express challenges you may be facing,” wrote NCUA Chairman Rodney Hood. “The NCUA will continue to be mindful of the impact of information requests on any credit unions experiencing operational and staffing challenges associated with responding to COVID-19.


Economic / Financial Services News

Savings Growth Continued to Outpace Loan Growth in March

Savings growth outpaced loan growth again in March, according to CUNA’s latest Monthly Credit Union Estimates, resulting in an average loan-to-share ratio of 81.65% in March down from 82.12% in February. Credit unions’ liquidity has been generally increasing since last summer.

“Liquidity is critical to serving members in the context of the COVID-19 recession. We expect savings growth to continue to grow faster than loan growth for the rest of the year,” said Samira Salem, CUNA senior policy analyst. “In fact, we expect April data to show a massive increase in deposits mostly due to stimulus checks and unemployment benefits. This will further increase liquidity but will put downward pressure on earnings.”

March savings balances grew 0.89%, down from 2.17% in February. Year-to-date savings balance growth for the first quarter of 2020 registered a solid 4.31%.

Share draft growth in March declined to -2.43% from a strong 5.37% in February. The last time March share draft growth was negative was in 2015.

“The contraction in share draft growth this time around maybe because some members might have lost jobs as a result of the COVID-19 economic slowdown so their direct deposits might have dried up,” Salem said. “In addition, members may be turning to these accounts for more urgently needed liquidity.”

Regular share drafts fell slightly to 2.30% in March from 2.83% in February. Despite the low interest rates, money market account growth remained solid coming in at 0.94% down slightly from 0.99% in February.

“This likely signals that members are searching for safe places to keep their liquid savings,” she said. “By contrast, certificates of deposit grew 0.28% in March down from 0.42% in February, suggesting that in the context of the COVID-19 pandemic members might be getting nervous about tying up their money.”


U.S. Household Debt Hit Yet Another Record in 1Q, Despite Pandemic

Americans increased their borrowing for the 23rd straight quarter to a total of $14.3 trillion, according to the Federal Reserve Bank of New York, the latest snapshot of household balance sheets entering what many experts believe to be a recession.

Total U.S. household debt rose by $155 billion in the first quarter from the previous three-month period, or 1.1%, the New York Fed’s quarterly report showed. Overall household debt is now 28.2% above the second-quarter 2013 trough.

The steady increase in consumer borrowing has set records with every passing quarter, but still remains shy of the inflation-adjusted $15 trillion that Americans owed in 2007, New York Fed data show. (Credit Union Journal, May 5)

Ways the Coronavirus Could Affect Home Prices

The S&P CoreLogic Case-Shiller home price index released this week reflected relatively stable housing activity through February. The impact of the coronavirus outbreak in March will not be revealed in cold, hard stats until those numbers are released in late May.

Nevertheless, John Dolan — an independent market maker in futures based on the Case-Shiller 10-city index and an expert witness with more than three decades of experience with structured securities in the mortgage market — already has some thoughts on how the coronavirus is affecting housing trends now, and will in the future.

From an intensified homeowner preference for smaller cities to increased downward pressure on housing prices in states experiencing pension fund challenges, the virus has several impacts mortgage businesses should prepare for, including the following:

  • Big cities may lose some of their appeal
  • Millennials' interest in home buying may wane
  • Some are only preparing for one downturn, but there could be two - Most market participants are preparing for a single coronavirus-related downturn in the housing market, but some are concerned there could be a second wave of COVID-19 infections, which would cause further disruption.
  • Tighter loan underwriting could feed into downward pressure on prices

(Credit Union Journal, May 6)

PPP Safe Harbor Extended to May 14

Borrowers now have until May 14, 2020, to decide whether to return Paycheck Protection Program (PPP) funds within a safe harbor period provided by the U.S. Small Business Administration (SBA).

The SBA released FAQ 43 on May 5, just two days prior to the initial May 7 deadline, stating that the safe harbor period would be automatically extended for all borrowers to May 14.



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