U.S. Central and Western Corporate Update

U.S. Central and Western Corporate Update
Randall C. Smith, Managing Editor

The NCUA placed U.S. Central and Western Corporate Credit Union into conservatorship to stabilize the corporate system and clear up balance sheet issues. The action was predicated on both due to credit losses the exceeded capital which impaired liquidity to retail credit unions without government support. This action also removes obstacles for the NCUA to take actions to protect retail credit union deposits and the interests of the NCUSIF.

As a result of the NCUA’s conservatorship board and senior management changes have taken place at both corporates as mandated by the NCUA. During the NCUA’s webinar updating the corporate stabilization plan, Executive Director David Marquis announced that you can“completely take out PIC and member capital accounts, and still leaves a rather sizable hole, which we will cover.”

Rating agency, Fitch affirmed the Issuer Default Rating on eight corporate credit unions yesterday based on NCUA actions. With the NCUA statement and action taken, Fitch expects support to be coming that will allow the corporates to operate at current rating levels.

CU Leaders in Front of Senate Committees Today

Three leaders from the NCUA and CEO’s from two credit unions representing CUNA and the NAFCU will testify at Senate hearings today on deposit insurance and help paying for the $5 billion corporate credit union bailout.

The NCUA would like to expand the powers of the Central Liquidity Fund (CLF) and widen out the assessment for the bailout for up to 8 years. The NCUA announced in a media release that Chairman Michael E. Fryzel and Executive Director David M. Marquis are scheduled to testify before the Senate Banking, Housing, and Urban Affairs Committee at a hearing on “Modernizing Bank Supervision and Regulation.” Associate General Counsel Sheila Albin is scheduled to testify before the House Subcommittee on Financial Institutions and Consumer Credit at a hearing on “H.R. 627, the Credit Cardholders’ Bill of Rights Act of 2009; and H.R. 1456, the Consumer Overdraft Protection Fair Practices Act of 2009.”

CUNA and the NAFCU will be represented by Terry West, pres/CEO of Vystar Credit Union and David J. Wright, pres/CEO of Services Center Federal Credit Union.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

Impact of NCUSIF Premium Survey

The results are in from the NAFCU’s March flash report. Almost 98% of those surveyed predict their CUs net income growth will be effected by the premium. The NCUA decided to levy a 1.3 percent premium on CUs to steady the NCUSIF as part of the corporate stabilization plan. The premium is projected to cost credit unions on average 62 basis points in return on assets.

According to the report over 80% of CUs surveyed expect net income growth to decline this year. Less than 35% expect an increase in asset growth for 2009 and 70% of credit unions have adjusted their forecasts.

The credit union community is split on asset quality, with just over half anticipating it to stay the same in 2009. You can read the full report on the NAFCU website.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

NAFCU Webcast with Fannie Mae

The NAFCU is offering a free webcast to members on March 25th sponsored by Fannie Mae. The webcast will focus on how to leverage DU(r) for a more efficient and effective refinance offering. DU RefiPlus™ will be available in the DU 7.1 release on April 4, 2009. Also, learn how to use it effectively at the point-of-sale, in your business process, and with technology integration.

For more information or to register follow the link in the CUiNSIGHT.com Webinar Calendar.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

CUiNSIGHT.com Welcomes a New Premier Sponsor

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To learn more about and support CuINSIGHT.com’s newest sponsor follow the link below.
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Randall C. Smith, Managing Editor
CUiNSIGHT.com

Bill on CRA Introduced Against CU Community Opposition

Rep. Eddie Bernice Johnson of Texas introduced a bill that would include credit unions in the expansion of the Community Reinvestment Act (CRA). In the bill credit unions along with mortgage companies, insurance companies and securities firms would require a CRA exam to judge how well the institutions serve minorities and low income groups.

The NCUA, CUNA and NAFCU have all stated that they oppose the addition of credit unions to the CRA.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

Plan for Largest CU Merger Ever

GTE Federal Credit Union and Suncoast Schools Federal Credit Union announced a proposal to merge the two multi-billion dollar credit unions. The merger would be the largest credit union merger ever with combined assets reaching nearly $8 billion.

Both Florida credit unions have been hard hit by the housing market collapse and an increase in bankruptcy filings of their members. Tom Dorety, President of Suncoast, stated “The problems both of us are seeing are consumer driven and clearly due to where we live.”

The merger isn’t expected for another year. Suncoast and GTE will review financial statements, operation, contracts, underwriting standards, IT systems, human resources, and regulatory examinations for the next six months before submitting the merger proposal to the NCUA for approval.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

Central State Mortgage Suspends Operations

The Wisconsin based CUSO, Central State Mortgage, suspended operations on Monday. The CUSO is one of the nation’s largest mortgage companies serving 250 credit unions nationwide.

On Monday the Milwaukee Journal Sentinel stated that Central States “has been involved in numerous controversial dealings and recently filed a racketeering suit against Richard Jungen, its founder and former CEO. The suit against Jungen and other former executives charges they defrauded the company out of at least $15 million.”

Central States Mortgage is owned by 25 Wisconsin based credit unions and the Wisconsin Credit Union League.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

Credit Unions Oversubscribe CU SIP Offering

A NCUA Media Release dated March 6th announced that the Credit Union System Investment Program (CU SIP) has been extremely successful due to the high level of support from credit unions.

Over $7.7 billion has been issued to corporate credit unions during the first two subscriptions. The CU SIP remains open for subsequent offerings if the need arises. The corporate CU’s have used the dollars to pay down external borrowing, freeing collateral for future contingency liquidity needs.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

Update: House Passes Cram Down Bill Over CU Objections

Update: House Passes Cram Down Bill Over CU Objections

The House passed the Mortgage Bankruptcy Bill yesterday intended to ease the burden on homeowners facing struggles to pay their mortgage. The legislation now heads to the Senate for consideration, if passed empowers federal judges to modify mortgages for borrowers who file for bankruptcy.

The credit union community has lobbied strongly against this bill.

Randall C. Smith, Managing Editor
CUiNSIGHT.com

Credit Union Community Continues Fight Against Cramdowns

With a vote on the compromised bill coming to the House as early as this afternoon the credit union community has continued its lobby against the measure. The bill allows bankruptcy courts the authority to modify mortgages.


The credit union lobby has strongly opposed and continues to oppose cramdowns. In polling the vast majority of credit union professional views it as a bad deal for the credit union community.

More Information on www.cuinsight.com.

Randall C. Smith - Managing Editor
CUiNSIGHT.com

Visa States There is No New Data Breach

Visa informed card issuers that recent alerts were actually part of an existing investigation and were not related to a new event. In the end it looks like Heartland Payment Systems may be the only new data breach this year. Visa did not name the company that is the focus of the existing investigation.

More information at www.cuinsight.com


Randall C. Smith - Managing Editor
CUiNSIGHT.com

NCUA Guidance on Recognizing Corporate Impact

On Friday the NCUA provided examiners guidance on the potential impact of the Corporate Stabilization Program on credit unions balance sheets. Supervisory Letter 09-01 instructs examination staff to differentiate between the impact of recent NCUA Board actions and operational activities by credit union management when evaluating credit union performance and risk profile.


NCUA Chairman Michael E. Fryzel stated, “This Supervisory Letter is part of overall NCUA efforts to recognize and mitigate the impact of the Corporate Stabilization Program on credit union earnings and net worth.”


The goal of the guidance is to allow members to see the factors that are affecting their credit unions bottom line.


More information on http://www.cuinsight.com/


Randall C. Smith - Managing Editor
CUiNSIGHT.com

New Security Breach Warning

Visa and MasterCard have issued warnings of another breach of a payment processor, and it’s not Heartland Payment Systems. According to an announcement posted by Tuscaloosa VA Federal Credit Union, malicious software was placed on the network of another payment card processor. The announcement stated that Visa and MasterCard are not willing to identify the processor due to the fact that they have not made the breach public yet.


The breach is said to involve purchases made over the phone or on the internet. Card numbers and expiration dates were exposed but not other personal information or PINs. It is not know yet how many cards are at risk due to this security breach.


This is the second breach of data from a processor this year. The number of credit unions affected is still unknown.

Randall C. Smith - Managing Editor

CUiNSIGHT.com

FBI Investigating Massive Fraud at C.U. National Mortgage

The FBI is investigating claims that a massive fraud has taken place at U.S. Mortgage Corp. This is the privately held owner of C.U. National Mortgage that halted loan originations on February 6th and filed for chapter 11 bankruptcy protection earlier this week.


A release by the company stated, “Although (crisis management firm NachmanHaysBrownstein) had sought to avoid a bankruptcy filing in order to save costs and prevent delay, and was supported in this effort by the vast majority of affected credit unions, a credit union insisted upon advising its members to stop sending payments normally to the company on their mortgages.”


The same release also acknowledged “irregularities in the company’s accounts and recordkeeping.”

More information at www.cuinsight.com


Randall C. Smith - Managing Editor
CUiNSIGHT.com