(Feb. 19, 2021) Four new summaries have been posted by NASCUS, looking at recent actions from NCUA, which include: two regulatory alerts, a final rule on supervisory guidance, and (along with other federal regulators) answers to questions about anti-money laundering activities.
All four of the summaries are available to members only.
The summaries on regulatory alerts from NCUA look at two issued earlier this month: the first on 2021 threshold adjustments under Regs C, Z and V; the second on submission of 2020 Home Mortgage Disclosure Act (HMDA) data. The first alert (21-RA-02) notes that, in January, the bureau published annual adjustments for exemption thresholds under the Home Mortgage Disclosure Act (HMDA, Regulation C) and the Truth in Lending Act (TILA, Regulation Z). The asset-size thresholds, the alert points out, exempt some credit unions from data collection under Regulation C and from escrow account requirements for higher-priced mortgage loans and specific qualified mortgages under Regulation Z.
The alert also notes that the CFPB published an annual adjustment to the maximum amount consumer reporting agencies may charge consumers for making a file disclosure to a consumer under Regulation V.
The second alert (21-RA-03) reminds credit unions with $47 million or more in assets that they have until March 1 to file reports on home mortgage loan applications made last year under HMDA (as implemented by the CFPB’s Reg C). There are some limiting provisions for reporting under the rule, the agency pointed out in the alert. For example, the closed-end mortgage loan threshold increased from 25 to 100 effective July 1, 2020. “Credit unions that originated fewer than 100 covered closed-end mortgage loans in 2018 or 2019 are not required to report any closed-end mortgage loan information for 2020,” the agency wrote, noting that Section 1003.3(c) of Regulation C lists excluded (not covered) transactions.
The third summary from NASCUS looks at the agency’s final rule on supervisory guidance. Issued early this month. Under the rule, aimed at clarifying and codifying the role of supervisory guidance, the meaning of “supervisory guidance” is clarified as meaning, essentially, it doesn’t have the force of law. As finalized, it codifies an interagency statement issued by NCUA and other federal financial institution regulators in September 2018.
The final summary from NASCUS this week outlines “frequently asked questions” (FAQs) about suspicious activity reporting and other anti-money laundering considerations released by NCUA, Treasury’s Financial Crimes Enforcement Network (FinCEN) and federal banking agencies. According to the agencies, the FAQs clarify the regulatory requirements related to suspicious activity reporting to assist credit unions and other financial institutions with their compliance obligations. The FAQs also enable financial institutions to focus resources on activities that produce the greatest value to law enforcement agencies and other government users of Bank Secrecy Act (BSA) reporting, the agencies said.
NASCUS Summary: Final Rule Summary: Role of Supervisory Guidance (Part 791, Subpart D) (member only)
(Feb. 19, 2021) No premium – for now — is in the works for credit unions to pay to bring the federal credit union savings insurance fund back up to its “normal operating level,” but that could change after June, according to a discussion held by NCUA Board members Thursday.
“We may no longer be able to avoid it,” NCUA Board Chairman Todd Harper said about a future premium for credit unions. “It’s no longer a question of if, but when and how much” of a premium will be charged. He added that, whatever decision the board ultimately makes about a premium, it will be data driven – and the result of consensus among the board members, himself, Vice Chairman Kyle Hauptman and Member Rodney Hood.
During a briefing on the current equity ratio of the National Credit Union Share Insurance Fund (NCUSIF) – which describes the total reserves in the fund relative to the total credit union savings insured – the board was told the ratio at year-end 2020 stood at 1.26% — six basis points (bp) below that projected by NCUA in September.
The 1.26% equity ratio is also 12 basis points (bp) below the “normal operating level” (NOL) of the fund that is set by the agency board. The NOL is the reserve level at which the board has determined the fund can adequately cover any losses presented to the fund.
Looking ahead, the board was told by staff during the briefing, more savings are expected to flow into credit unions in the coming months, continuing a trend that surfaced last year, and spurred in 2021 by another federal economic stimulus package now in the works by Congress. (The stimulus is meant to counter the financial impact of the ongoing coronavirus crisis.) Meanwhile, earnings on the fund’s reserves are expected to remain reduced, reflecting the low-interest rate environment. The result: continued downward pressure on the NCUSIF equity ratio, making it more difficult to reach the NOL by this summer, the next time the board hears a report on the equity ratio.
NCUA Chief Financial Officer Eugene Schied, during the presentation, noted that credit unions will adjust their 1% deposits in the insurance fund (collected in April), which will total about $866 million. He said that would result in about a 5 bp bump to the equity ratio – which, when added to year-end’s equity ratio, is still well below the NOL, and will also be affected by any increase in savings in insured by mid-year.
Schied said (in answer to a question from Todd Harper), however, that it is still too early to tell where the equity ratio will be as of June 30. Nevertheless, staff agreed with Harper that the trendline for the equity ratio has been going down since 2018.
LINK:
NCUA Board Briefing: Share Insurance Fund Quarterly Report.
Harper comments at 2/18/21 NCUA Board meeting, re: NCUSIF
(Feb. 19, 2021) NASCUS President and CEO Lucy Ito commended all three board members for their vigilance in monitoring the insurance fund equity ratio, “especially in light of the root cause for the downward pressure on the ratio: a dramatic and likely continuing increase in insured shares related to economic stimulus payments, and not unsafe or unsound operating practices by credit unions.”
She also agreed with comments by both Vice Chairman Hauptman and Board Member Hood that the agency must proceed carefully regarding a premium, and with Harper about any decisions made about a premium be data driven.
“NASCUS is also intrigued by the suggestion of possible congressional action to expand the investment authority of the insurance fund that would maximize yield while assuring the protection of the fund,” Ito said, noting comments made by Harper during the meeting. “The state system will be studying the statutorily permissible investments by the NCUSIF compared to the FDIC to inform potential legislation.”
(Feb. 19, 2021) Amanda Tuckey will lead NASCUS’ marketing and communications efforts when she joins the association next week as senior director of communications and marketing.
Most recently the director of marketing strategy and research for the Michigan Credit Union League (in Lansing), Tuckey brings broad experience to the state system’s representative association in such fields as campaign and brand management, marketing research, and consumer engagement.
A winner of the Diamond Award from the Credit Union Natl. Assn. (CUNA) for best brand awareness, and other honors, Tuckey is a former marketing director for the Michigan State Housing Development Authority and art director for the state’s Economic Development Corp. She has also managed her own marketing consulting firm.
She holds a BA in Psychology from Michigan State University and is currently completing work toward an MS in marketing research at the university.
“Through her work with the Michigan league, Amanda has developed a solid understanding of the credit union community, its challenges and its needs,” said NASCUS Leader Lucy Ito. “And her work with state agencies provided her with insight to the mechanics of local government. Combined with her accomplishments in marketing and communications, she is an outstanding addition to our team.”
(Feb. 19, 2021) The White House this week announced extensions of the moratorium on foreclosures and mortgage forbearance programs that were set to end in March to help provide relief to homeowners with federally guaranteed loans currently in forbearance due to the coronavirus crisis
The changes apply to loans guaranteed by the Department of Veterans Affairs or Department of Agriculture, and those insured by the Department of Housing and Urban Development. More specifically:
- The foreclosure moratorium for homeowners is extended through June 30, 2021;
- The mortgage payment forbearance enrollment window is extended until June 30, 2021 for borrowers who wish to request forbearance;
- Additional mortgage payment forbearance, in two three-month increments, is provided up to six months for borrowers who entered forbearance on or before June 30, 2020.
The announcement was made in conjunction with formal announcements by each of the departments in a coordinated effort to extend and expand upon existing forbearance and foreclosure relief programs. Last week, the Federal Housing Finance Agency (FHFA) said Fannie Mae and Freddie Mac would extend forbearance by three months for borrowers coming to the end of their forbearance period and extend the moratorium on foreclosures for Fannie Mae and Freddie Mac loans to March 31, 2021.
(Feb. 19, 2021) While four funds administered by NCUA all earned unmodified or “clean” audit opinions for 2020, the agency’s inspector general still outlined a number of 2021 challenges for credit unions that could have an impact on continuing that audit performance, according to a report issued this week.
The agency said its auditor, KPMG LLP, issued unmodified opinions for the National Credit Union Share Insurance Fund (NCUSIF), the agency’s operating fund, the Central Liquidity Facility (CLF), and the Community Development Revolving Loan Fund (CFRLF).
In issuing the audit opinions, the agency’s office of inspector general (OIG) also outlined as the major challenges in 2021 for credit unions (and the funds) to be: cyber threats, technology-driven changes to the financial landscape, interest-rate risk, membership trends, and a recovery from the coronavirus crisis.
“We believe the economy and credit unions’ recovery from the COVID-19 pandemic will be the NCUA’s greatest management challenge going forward in 2021 and possibly beyond,” the OIG report states.
“Even if the economy continues to recover as expected, the operating environment for credit unions over the next two years could prove to be more difficult than in prior years, and credit union performance could deteriorate,” the report adds. “Credit unions should plan for a range of economic outcomes that could affect their performance and resource needs.”
In the other areas, the report notes:
Cyber threats: “Credit unions’ increasing use of technology exposes the credit union system to increasing cyber-attacks. Specifically, malware, ransomware, distributed denial of service (DDOS) attacks, and other forms of cyber intrusion affect credit unions of all sizes and will continue to require ongoing measures for containment,” and pose significant dangers to the safety and soundness of credit unions, according to the report. The report urges credit unions to continue to harden, monitor, and enhance the security of their systems.
Technology changes: In addition to products that pose competitive challenges to credit unions by mimicking deposit and loan accounts (mobile payment systems, pre-paid shopping cards, peer-to-peer lending), credit unions will also face challenges from financial technology (fintech) companies in underwriting and lending, the report asserts. “Fintech companies may be able to automate these services at a cost below levels associated with more traditional financial institutions but may not be subject to the same regulations and safeguards that credit unions and other traditional financial institutions face. As these companies and products gain popularity, credit unions may have to be more active in marketing their products and services and rethink their business models.”
Interest-rate risk (IRR): NCUA and credit unions will need to focus on managing and mitigating interest-rate risk, the report states. Deposit rates have fallen since the start of 2020 and will likely remain low, pressuring credit unions to offer competitive deposit rates to avoid deposit attrition. Meanwhile, credit unions that rely primarily on investment income may find their net income remaining low or falling.
Membership: NCUA and credit unions face the challenge of an aging demographic, the report states, “and unfortunately, these same membership concerns continue.” The report claims that although overall credit union membership continues to grow strongly, close to half of federally insured credit unions had fewer members at the end of the third quarter of 2020 than a year earlier. “All credit unions need to consider whether their product mix is consistent with their members’ needs and demographic profile,” the report states.
LINK:
NCUA’s Four Funds Receive Clean 2020 Audit Opinions
(Feb. 19, 2021) In other action Thursday, the NCUA Board unanimously approved a final rule on joint ownership share accounts, and heard a report on the new Emergency Capital Investment Program (EICP) established for financial institutions under legislation late last year.
The final rule on joint ownership share accounts, proposed by the board last May, would allow account records information other than a signature card to support the insured status of a joint ownership share account in a credit union. The final rule provides federally insured credit unions with an alternative method to satisfy the membership card or account signature card requirement, the agency said. “For example, under the final rule, the signature card requirement can be satisfied by the credit union having issued a mechanism for accessing the account, such as a debit card, to each co-owner or evidence of usage of the joint share account by each co-owner,” NCUA said.
NASCUS, in its comment supporting the proposal last year, wrote that providing federally insured credit unions flexibility in satisfying the signature card requirement with information in joint account records acknowledges that account opening practices have evolved substantially over the last nearly 50 years. NASCUS agreed with the proposal’s overall approach – and offered a modest change: replacing the phrase “such as” with “including, but not limited to.” Doing so, NASCUS wrote, would allow NCUA to “make clear on the face of the regulation that other evidence in the account records may be sufficient to establish qualifying joint ownership of a share account.”
Harper was commended by NASCUS’ Lucy Ito for considering state laws and rules in the agency’s deliberations over the final rule. The rule takes effect 30 days after publication in the Federal Register.
The board also heard a report on the new EICP, which was established by the Consolidated Appropriations Act, 2021, (adopted late last year) to encourage low- and moderate-income community financial institutions (such as federally insured CDFIs or MDIs that are in sound financial condition) to augment their efforts to support small businesses and consumers in their communities. The program contains $9 billion appropriated to Treasury to fund the program. For credit unions to participate, they may only issue subordinated debt to Treasury with a specified aggregate principal amount.
Eligible state-chartered credit unions must apply separately to (a) Treasury for access to ECIP funding and to (b) either their state regulator (state charters) or to NCUA (federal charters) for secondary capital approval.
LINKS:
Final Rule, Part 745, Joint Ownership Share Accounts
Board Briefing, Consolidated Appropriations Act, 2021, Emergency Capital Investment Program
(Feb. 19, 2021) NCUA said registration is now open for a Tuesday (Feb. 23) webinar on the earned income tax credit and the volunteer income tax assistance (VITA) programs. The program, which gets underway at 2 p.m. ET (and runs for about 45 minutes), includes information on credit union call report data, earned income tax credit resources, and stakeholder partnerships. Both NCUA and the IRS (which is also participating) will discuss financial literacy efforts regarding the earned income tax credit and VITA, geared to low- and moderate-income families, and highlight the resources available to consumers. See the link below for registration information … Sultan Meghji, the founder of a financial technology firm Neocova which reportedly provides services to credit unions and banks, is the new – and first — chief innovation officer (CINO) for the FDIC, ending a search by the agency to fill the position that started in 2018, the agency said this week. In naming Meghji to the role, the agency said he would lead the agency’s drive to promote adoption of “innovative technologies across the financial services sector.” Neocova, according to the FDIC, is a St. Louis-based firm that focuses on cloud and artificial intelligence-based software for credit unions and community banks … The thoughts and hopes of the state system are with everyone and anyone affected by the grave weather conditions experienced across the country over the past week.
LINK:
Tax time resources for credit unions and consumers
(Feb. 19, 2021) Stanley M. Dameron has been appointed commissioner of the Louisiana Office of Financial Institutions in the Office of the Governor, succeeding John Ducrest who retired late last year. Dameron, appointed by Gov. John Bel Edwards (D), is the past president and CEO of American Bank & Trust and a U.S. Army Veteran, according to the OFI. He assumed his new office Feb. 17. Like many states in the south-central portion of the country, the OFI office has been closed this week due to the weather, delaying Commissioner Dameron’s physical start at the office.