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June 8, 2018

Rule easing MBL restrictions under new law effective June 5

A new rule implementing changes in the law to give federally insured credit unions the ability to exclude some of their home loans from business lending restrictions went into effect this week, the result of action taken by the NCUA Board late last week. A week ago, NCUA announced that the board voted (by notation vote) to change its rules to reflect a new law enacted May 24 with the passage of S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act. The provision in the law reclassifies one-to-four unit, non-owner occupied residential loans as real estate loans, so the loan would not count against the member business lending cap.

The NCUA Board’s action last week was one of the first made by a federal regulator to put into effect changes brought about by the new law. The agency’s rule changed changed an occupancy requirement for loans secured by liens on 1-to-4-unit family dwellings to be excluded from the business lending restriction. Previously, the NCUA’s MBL rule required such dwellings to be the primary residence of a member to be excluded from a credit union’s MBL cap.

The action officially took effect June 5, when the board’s decision was published in the Federal Register. Other provisions of S.2155 (even those without hard-wired effective dates) are still awaiting implementation by federal regulators, including NCUA. Those changes include: rescinding additional data points required under the Home Mortgage Disclosure Act (HMDA) for insured credit unions that originate fewer than 500 closed-end and/or 500 open-end lines of credit; removing a three-day wait period required for the combined TILA-RESPA Integrated Disclosure (TRID) mortgage disclosure if a creditor extends to a consumer a second offer of credit with a lower annual percentage rate; establishing a safe harbor from certain requirements for a loan to be considered a Qualified Mortgage; providing a safe harbor for properly trained financial employees who report alleged elder financial abuse.

A final rule summary has been developed, and posted on its website, by NASCUS about the rule changes as a result of the law.

Also under the new law, NCUA is required to make public a draft of its proposed budget; hold a hearing with public notice at which the draft would be discussed; and solicit and consider public comment about the draft budget. So far, the agency has not revealed its plans for executing the public review of its budget. Two years ago, the agency revived a past, but lapsed, practice of sharing its budget and holding a hearing for stakeholders.

LINKS:
NCUA Final Rule, Commercial Lending

NASCUS final rule summary: changes to NCUA rules, commercial lending


STATE CUS INCREASED ASSETS TO NEARLY $700B IN Q1 '18

State-chartered credit unions grew their assets by 3.1% in the first quarter of the year, reaching nearly $700 billion in total, according to NCUA first quarter numbers released this week, and NASCUS estimates.

The first quarter numbers from NCUA, which only count federal credit unions and federally insured state CUs, show that federally insured, state-chartered credit unions (FISCUs) held $681 billion in assets at the end of the first quarter of this year. NASCUS estimates that, based on growth for privately insured credit unions, total assets for state chartereds is now $697 billion (there are about 113 privately insured credit unions nationwide), or about 48.7% of all credit union assets. The asset growth for the state credit unions is slightly higher than that for federal credit unions, which grew by 2.3% in the first quarter, according to the NCUA numbers

The quarterly figures from NCUA and NASCUS estimates also indicate that memberships at all state credit unions grew to 54 million (up slightly from year-end 2017, by .61%), now accounting for 47.5% of all credit union memberships. (FISCUs, according to the NCUA numbers, counted just shy of 53 million members at the end of the quarter.)

In other areas, the NCUA first quarter numbers show that FISCUs:

  • Had return on average assets of 0.87% (compared to 0.93% for FCUS);
  • Reported a net worth ratio of 10.74% (compared to 11.02% for FCUs);
  • Held 26.5% of total assets as long-term assets (compared to 28.9% for FCUs);
  • And reported delinquency and charge off rates of 0.63% and 0.12%, respectively (compared to 0.68% and 0.18% for FCUs).

LINK:
NCUA Releases Q1 2018 Credit Union System Performance Data


BANKERS FILE ‘CROSS APPEAL’ IN FOM RULING

A federal court’s ruling on credit union membership rules that essentially gave both sides in the case something to call both a win and a loss has now been appealed by the two parties in the case, NCUA and one of the leading bank trade associations.

Tuesday, the American Bankers Association filed its “notice of cross appeal” with the U.S. Court of Appeals for the District of Columbia, asking the panel to review a March 29 decision by the lower court, in particular that section of the ruling that upheld a portion of NCUA’s “field of membership” rules. That portion of the agency’s final rule permitted a credit union to serve a portion of a “Core-Based Statistical Area” that does not include the “core area.”

The move by the bankers’ association comes after NCUA’s own May 23 decision to appeal portions of the ruling. The NCUA appeal asks the panel to review the district court’s decision on the two vacated portions of its regulation on “combined statistical area” and on raising to 1 million people the population limit for rural districts that may be served.

LINKS:
NASCUS summary analysis of court's decision in FOM challenge (members only)


SUMMARY OUTLINES INVOLUNTARY LIQUIDATIONS RULE CHANGES

NCUA is expanding its definition of permissible employment-related claims to include vacation, sick, and severance pay if the payment is supported by an employee handbook or other credit union record and is calculable in accordance with a formula or criteria available to all employees, according to a new NASCUS summary of the agency’s changes to Part 709 of its rules.

In the summary of the agency’s new rule (adopted at its May meeting) on involuntary liquidation and claims procedures, NASCUS notes that the rule establishes the procedures that apply to the administration of claims for federally insured credit unions that enter involuntary liquidation. The rule clarifies the requirements for proof of a claim by an employee for pay or benefits (i.e. unpaid wages, sick time or vacation time) and distinguishes between employees’ claims and claims by credit union executives that constitute a golden parachute. The rule, NASCUS also points out in the summary, applies to all federally insured credit unions).

The definition expansion “represents an exception to the general rule in section 750 providing that all claims for employee welfare benefits are not provable against the liquidating agent, ” the NASCUS summary also states.

The rule takes effect June 29, 30 days after publication in the Federal Register.

LINK:
Final Rule Summary: Part 709, Involuntary Liquidation of FCUs and Claims Procedures


ACTING BCFP DIRECTOR ACTS: ‘RECONSTITUTES’ CU COUNCIL …

After postponing recent meetings, BCFP Acting Director Mick Mulvaney this week disbanded the bureau’s Credit Union Advisory Council (CUAC) and two other advisory groups, with the stated intent of reorganizing them into smaller groups, with new members, selected through an application process that began earlier this year. Current advisory group members are not being allowed to re-apply for membership. In a statement, the bureau said the changes will “enhance its ability to hear from consumer, civil rights, and industry groups on a more regular basis.” In addition to the reorganized groups, the agency said it would engage with the public and stakeholders by holding regional town halls, roundtable discussions with consumer finance experts and representatives, regional roundtables, and regular national calls.

LINK:
CFPB blog item: Transforming the way we engage


… WORKS TO PULL OUT OF CASE CHALLENGING AGENCY

Meanwhile, also this week, other moves by the acting director indicate the bureau is poised to end its court battle with nonbank mortgage lender and servicer, PHH Corp. Litigation began when the agency fined PHH $109 million for illegally accepting kickbacks from mortgage insurers to which it had referred customers. PHH appealed the fine, arguing that the agency overreached and that its single-director structure was unconstitutional. In January, the U.S. Court of Appeals for the D.C. Circuit found that the agency violated due process and remanded part of the case back to the bureau. The appeals court also ruled that the creation of the agency's single-director structure, through the Dodd-Frank Act, was constitutional.


SAVE YOUR ROOM NOW! SUMMIT BLOCK CLOSES SOON

The hotel room block closes June 22 for the 2018 NASCUS State System Summit next month at the Disney Yacht and Beach Club resort and hotel in Orlando. Make your reservations (and register for the meeting) as soon as possible so you don’t get locked out. The four-day summit – the only national, annual event that brings together regulators and credit unions to chart the course of the future of the state credit union system – is set for July 16-19 at the Florida resort. The agenda over the four days includes sessions on cybersecurity, payments and risk management, among other things. With about 22 hours of presentation and discussion, the Summit features topics chosen in consultation with NASCUS members which reflect the interests of the state system, and especially how to effectively address and resolve issues, and address challenges and opportunities that have arisen in those topics. For more information about the Summit, see the link below.

LINK:
2018 NASCUS State System Summit, July 16-19, Orlando (Disney Yacht and Beach Club resort)


ON THE ROAD: In WA for panel; in TN for cybersecurity

(In left photo) NASCUS President and CEO Lucy Ito joined both state regulators and credit union leaders in a panel discussion last week in conjunction with the Northwest Credit Union Association’s Washington State Issues Working Group to discuss potential enhancements to the Washington state credit union charter. State regulatory parity provisions, member business lending rules, permissible investments in credit union service organizations (CUSOs), credit union board organization and other issues were also on the table for discussion. Participating state regulators in attendance included Iowa Superintendent Katie Averill, Indiana Director Tom Fite, and Illinois Secretary Bryan Schneider. (In the photo: Ito and NWCUA’s John Trull discuss the issues at hand)(In right photo) A capacity crowd turned out in Nashville this week for the NASCUS-CUNA Cybersecurity Conference to hear the latest developments in cybersecurity related to credit unions and financial institutions generally, including such areas as resilience, response and continuity, the value of cyber intelligence and effective third-party management. (In the photo: CUNA’s James Carrick (left) and NASCUS’s Brian Knight prepare to kick off the program Monday morning.)


BRIEFLY: L&R Committee gathers; FDIC chair fills out Trump nominations

Updates on developments with the BCFP, the impact of the newly enacted S.2155, regulatory relief legislation, and NCUA actions were all on the agenda this week when the NASCUS Legislative and Regulatory Committee met for its monthly conference call. The committee includes state regulators, credit union leaders and state system participants … Jelena McWilliams became the 21st chairman of the FDIC Board Tuesday when she was sworn into office. She succeeds Martin Gruenberg in the role, who remains on the board as a member. McWilliams became the fifth, and final, regulator appointed by President Donald Trump to head up a federal financial institution regulatory agency (including the appointment of NCUA Board Chairman Mark McWatters, the president’s first such appointment).

Information Contact:
Patrick Keefe, pkeefe@nascus.org