May 24, 2019 NASCUS Report

Proposal would expand non-member shares; NASCUS to review for impact on states, CUs

Non-member and “public unit” shares of up to 50% of paid-in and unimpaired capital and surplus could be accepted by federal credit unions under a proposal released for comment Thursday by the NCUA Board. The proposal also contains conforming amendments to NCUA rules affecting all federally insured credit unions (sec. 741.204) that reflect the proposed changes.

(In the video –click the image to view: NCUA Board Chairman Rodney E. Hood (center) applauds state examiners attending Thursday’s meeting while undergoing continuing education training at NCUA headquarters in Alexandria, Va.)

The proposal, issued by the board at its regular monthly meeting for May, would raise the limit of non-member shares a federal credit union may hold to 50% from the current 20% (or $3 million, whichever is greater). It would also eliminate the current requirement that an FCU request a waiver from the agency’s regional office if it wants to exceed the limit. Instead, an FCU would be required to develop a specific use plan if its nonmember shares, combined with its borrowings, exceed 70% of paid-in and unimpaired capital and surplus. Examiners would also be charged with watching the level at which credit unions accepted the non-member shares (which also include the public unit shares, or funds provided by the federal government and its agencies, state governments and agencies, local public school systems, and more).

NASCUS President and CEO Lucy Ito, in a press statement, said the association acknowledges NCUA’s efforts to provide credit unions with access to capital and greater flexibility through the proposal. “We will closely examine the proposed rule to determine its impact on state-chartered credit unions and to ensure it will not adversely affect the safety and soundness of the credit union system,” she said. “We have long held that capital reform is essential to the health of the credit union system and look forward to engaging with NCUA on the current proposed rule and any future proposals providing credit unions with access to additional forms of capital.”

NCUA Board membersurged credit unions and others to weigh in during the 60-day comment period. “I also want to hear from state supervisors about any limits that they may have in this area for state-chartered credit unions and whether they think additional flexibility will strengthen the system and enhance safety and soundness,” said NCUA Board Member Todd M. Harper.

In other action, the NCUA Board:

  • Heard a report from its Office of Credit Union Resources and Expansion (CURE) that a new chartering modernization effort is under way at the agency, aimed at automating and streamlining the process (see item below on new FCU chartered by NCUA). The agency plans a new web portal with information to assist credit union organizers, and will offer pre-developed business models that organizing groups can use. Additionally, CURE is working to support small, low income and minority depository institutions. NASCUS’ Ito said the association is particularly supportive of grants to strengthen the cybersecurity systems of small institutions. “Cybersecurity is a looming threat to all credit unions and we applaud the agency for assisting credit unions to defend themselves against attacks.”
  • Heard a report about the National Credit Union Share Insurance Fund (NCUSIF), which showed net income of $16.1 million and a net position of $15.8 billion for the first quarter of 2019. Total assets of the fund increased to $16.2 billion at the end of the quarter from $15.8 billion at the end of the fourth quarter of 2018, according to the report. “We note the fund’s net income performance and the agency’s stewardship of credit unions’ funds,” Ito said. “We encourage NCUA’s continual review of the normal operating level to balance the interests between covering emerging systemic risks and returning excess funds to credit unions.”

Proposed Rule §701.32: Payment on shares by public units and nonmembers

Update on the Office of Credit Union Resources and Expansion

Credit unions receive $160 million payout

More than 5,500 federally insured credit unions began to receive statements this week showing their share of a $160.1 million payout by NCUA of excess funds from their federal insurance fund. According to the agency, this month’s payout is the second-largest single payout from the fund (exceeded by last year’s nearly three-quarters of a billion dollar payment).

The agency said Tuesday that the statements are being sent to credit unions that filed a quarterly call report as a federally insured credit union for at least one reporting period in calendar year 2018. The funds are being distributed on a pro rata basis; the mean distribution is about $29,000.

The NCUA Board in March approved the $160.1 million payout (officially known as a “dividend”). The board made the decision after determining that the equity ratio of the National Credit Union Share Insurance Fund (NCUSIF) stood at 1.39% of total reserves to total credit union savings insured. The “normal operating level” (NOL) of the fund is 1.38% (as set by the board); the $160.1 million represents those funds that are in excess of the fund’s NOL, which the agency is required to return to credit unions under federal law and regulations.

This latest distribution is the second that the agency has made to credit unions over the last two years. In 2018, NCUA distributed nearly $736 million from the insurance fund after the board voted to close the Temporary Corporate Credit Union Stabilization Fund (TCCUSF, a fund set up in the wake of the housing crisis of 2009-10 to resolve troubled corporate credit unions). Earlier in 2017, the board proposed closing the fund, merging its remaining assets into the NCUSIF, and distributing any funds left over in the insurance fund above the 1.39% NOL.

Share Insurance Dividend Payments to Occur the Week of May 20

Agency charters first new federal credit union of 2019

The first federal credit union chartered in 2019 is now on the books, according to NCUA, with service anticipated to 4,200 members and a variety of small businesses related to the institution’s sponsor, the Otoe-Missouria Development Authority in Oklahoma. The agency said Monday it had chartered the Otoe-Missouria Federal Credit Union in Red Rock, Okla., which will serve members of the tribe and its employees. The agency said the new credit union will also serve 17 tribal-owned businesses. So far this year, NCUA has matched the total number of new credit unions chartered last year: according to the 2018 NCUA annual report, the agency chartered one federal credit union last year.

NCUA Charters Otoe-Missouria Federal Credit Union

NCUA, regulators schedule webinar on flood insurance rule

A no-charge webinar focusing on the interagency final rule for private flood insurance issued in February, and which goes into effect July 1, is scheduled June 18 by NCUA and federal banking regulators. The one-hour webinar (from 2-3 p.m. ET) will include discussions about:

  • Mandatory acceptance of private flood insurance;
  • Compliance aid for mandatory acceptance;
  • Discretionary acceptance of private flood insurance;
  • Flood coverage provided by mutual aid societies; and
  • Preparations to comply with the Rule.

The final rule issued early this year requires lenders to accept flood insurance policy coverage meeting the statutory definition of “private flood insurance,” including those provided by private insurers that do not meet the statutory definition if the coverage meets certain conditions. It also permits institutions to accept certain flood coverage issued by mutual aid societies.

Registration: Private Flood Insurance webinar

Payday lending, biz lending data, more on CFPB spring agenda

A delay in certain provisions of a rule on payday lending is slated for final action in June by the CFPB, according to details of the agency’s spring 2019 regulatory agenda. But the agenda, unveiled this week by the bureau in a blog post, provides no specific timeline for final action on proposed changes to the rule as contemplated in the bureau’s February 2019 notice of proposed rulemaking.

Announced Feb. 6, the two CFPB payday proposals revise the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” regulation that was finalized in 2017 and stayed from implementation by a federal judge pending the rule’s “reconsideration.” In reconsidering the rule, the bureau has proposed to rescind provisions that:

  • treat as “an unfair and abusive practice” a lender’s provision of a covered short-term or longer-term balloon-payment loan, including payday and vehicle title loans, without reasonably determining that consumers have the ability to repay those loans according to their terms;
  • prescribe mandatory underwriting requirements for making the ability-to-repay determination;
  • exempt certain loans from the mandatory underwriting requirements; and
  • establish related definitions, reporting, and recordkeeping requirements.

In addition to the proposed rule changes, the bureau also issued a proposal in February to delay implementation of the above-noted payday rule provisions until Nov. 19, 2020. The delay is slated for final action in June, or “this summer,” according to a related blog post Wednesday; that post indicated a final determination on the rule “reconsideration” would be issued “thereafter.”

In other areas of the bureau’s Spring 2019 agenda, areas of regulation that are in pre-rule, proposed, and final rulemaking stages are listed – including business lending data, which has found its way back onto the agency’s active agenda.

The CFPB issued a request for information (RFI) on this topic in 2017. This rulemaking relates to Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses.

A potential rulemaking to increase to $10 billion or less the asset size of certain institutions exempt from escrow requirements related to higher-priced mortgage loans is also on the planning board. “Pre-rule” activity on this change, called for under last year’s regulatory reform legislation (the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155)), is slated for November.

PACE loans, remittance transfers (an RFI was issued last month), the Expedited Funds Availability Act (EFTA, Regulation CC), and various activities related to the Home Mortgage Disclosure Act (HMDA) are also addressed on the spring agenda.

CFPB Spring 2019 agenda blog post

Summaries look at CFPB overdraft rule review …

Two new summaries from NASCUS look at the CFPB’s latest regulatory moves: a review of its overdraft rule, and proposed regulation on the Home Mortgage Disclosure Act (HMDA). Both summaries are now posted on the NASCUS website.

Regarding the overdraft rule review, NASCUS noted that the bureau is seeking comment on the economic impact of the overdraft rule on small entities.  “The Bureau intends to use the comments received to determine whether the rule should be continued without change or amended/rescinded to minimize significant economic impact on small entities,” the summary points out.

In particular, the summary states, the agency is looking for feedback on: the nature and extent of the rule’s economic impact in total and of its major components on small entities; whether or how costs on small entities could be reduced by the bureau, and; and other relevant information as the bureau continues its review. Comments are due no later than July 1.

NASCUS Summary: Overdraft Rule Review Pursuant to the Regulatory Flexibility Act

… and proposal on HMDA regulation

On the proposed HMDA regulation, the NASCUS summary notes that last year’s Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA, S.2155) provides partial exemptions from HMDA requirements for certain insured depository institutions (including credit unions).

Four years ago (in 2015), the summary states, the CFPB determined that institutions which originated: at least 25 closed end mortgage loans in each of the two preceding calendar years,  or at least 100 open-end lines of credit in each of the two preceding calendar years, would be required to collect, record and report HMDA data.  The bureau then issued an updated HMDA rule in 2017 that temporarily increased the open-end line of credit threshold to 500 open-end lines of credit for calendar years 2018 and 2019, the summary states.

Now, the NASCUS summary points out, CFPB is proposing amendments to Regulation C that would increase the closed-end mortgage loan origination threshold to trigger HMDA requirements.

“Under the proposal, institutions originating fewer than either 50 closed-end mortgage loans or alternatively 100 closed-end mortgage loans, in either of the two preceding calendar years would not have to report such data as of Jan. 1, 2020,” the NASCUS review states. “The proposal would also adjust the threshold for reporting data about open-end lines of credit by extending the current temporary threshold of 500 open-end lines of credit until January 1, 2020.  After that date, the open-end lines of credit threshold will be set to 200.”

Also incorporated into Regulation C under the proposal are the interpretations/procedures from the interpretive/procedural rule the bureau issued on Aug. 31, 2018, NASCUS noted.

Comments are due by June 12

Summary: Proposed rule with request for comments re: the Home Mortgage Disclosure Act (HMDA)

CU advisory councils, others, scheduled to meet June 5-6

Meetings of credit union and other advisory councils and board of the CFPB are on tap for next month, the agency this week. The bureau said the meetings of its Credit Union Advisory Council, the Community Bank council and the Consumer Advisory Board will all be held June 5 (from 12:30-4 p.m.) and June 6 (from 10 a.m. to 3:30 p.m.; both times ET). Details about the agendas for each of the group meetings were limited: the bureau said only that each group would “discuss broad policy matters related to the Bureau’s Unified Regulatory Agenda and general scope of authority.” All three meetings are scheduled to be held at the CFPB’s headquarters in Washington, D.C. (at 1700 G Street, NW).

Credit Union Advisory Council

Community Bank Advisory Council

Consumer Advisory Board

Symposium focuses on CECL – as does legislation

It was a packed house (in photo) at the NASCUS CECL Symposium in Louisville, Ky., Tuesday and Wednesday this week, as participants gathered to prepare themselves and their agencies and credit unions for the new accounting standard. The “current expected credit loss” accounting standard (and model) takes effect for most credit unions at the end of next year, and aims to provide timelier financial reporting of credit losses on loans and other financial instruments held by financial institutions (including credit unions) and other organizations. The two-day program in Louisville looked at the impact that the new standard is expected to have on credit union industry, and provided an update of the current status of the standard and how credits unions can begin to start their modeling process.

CECL was also making news in Washington this week, as legislation was introduced calling for a “stop and study” of the new accounting standard, essentially delaying the standard’s implementation. The “Continued Encouragement for Consumer Lending Act” (S.1564), would require a quantitative study on the potential impact of the CECL standard. As introduced by Sen. Thom Tillis (R-N.C.), the legislation would require regulators (including NCUA and others) to conduct the study. The legislation was immediately supported by credit union trade associations.

NASCUS 2019 education agenda

Details: S. 1564, the Continued Encouragement for Consumer Lending Act

BRIEFLY: Regulators turn out for panel discussion; NCUA external affairs director named; have a happy Memorial Day holiday!

Commissioner Gerry Little of the New Hampshire Banking Department and Deputy Commissioner Jay Bienvenu of the Massachusetts Division of Banks this week joined a panel moderated by Ron McLean, newly appointed CEO of NASCUS-member the Cooperative Credit Union Association (CCUA) at a meeting of the Association of Credit Union Senior Officers (ACUSO). The meeting was sponsored by NASCUS-member EasCorp in Burlington, Mass. A panel featuring NASCUS CEO Lucy Ito also participated in a second panel providing a Washington update.  … H. Lenwood Brooks is the new director of external affairs for NCUA, Board Chairman Hood announced this week. Brooks – a former trade association executive and Capitol Hill staffer – will serve as assistant to the chairman and will manage NCUA’s Office of Public and Congressional Affairs (PACA) as well as intergovernmental and stakeholder relations. Brooks is a former communications vice president for the Securities Industry and Financial Markets Association (SIFMA); he has also served on the staff of Sen. Roger Wicker (R-Miss.) working on issues related to the Senate Banking Committee .. … Here’s to a happy and safe Memorial Day holidayfor everyone!

NCUA Chairman Hood Appoints Lenwood Brooks as the Assistant to the Chairman and Director of External Affairs

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