June 1, 2011
NCUA may lift prepayment plan contribution cap
While the National Credit Union Administration (NCUA) has said that the maximum corporate stabilization assessment prepayment a credit union may make would be 36 basis points (bp), the agency said that it would consider lifting that cap if enough credit unions request that it be raised.
The NCUA covered its voluntary prepayment plan, which was proposed at its May board meeting and is designed to help smooth out future corporate credit union stabilization assessment rates, during a recent webinar. NCUA Chairman Debbie Matz reiterated that the prepayment plan was in response to several requests by credit unions. The NCUA said it could implement the plan by mid-August.
Credit unions would need to advance the minimum amount of $10,000 to participate in the plan, and the NCUA said it would not move forward with the plan if credit unions do not commit a combined $300 million in funds to the proposal. The prepayment plan would generate $2.8 billion in funds if all eligible credit unions contributed the maximum amount.
The Credit Union National Association (CUNA) has estimated that voluntary payments by all eligible credit unions at the maximum payment amount could reduce the amount of corporate stabilization-related assessments charged in 2011 from 25 bp to 11 bp. Corporate assessments charged in 2012 could fall to 10 bp from the currently planned 13 bp if maximum advance payments are made. The plan would affect the amount of each year's assessment through time, but not the total amount of assessments.
CUNA estimates that the NCUA will need to collect a minimum of $1 billion in funds for credit unions to recognize any benefits.
Credit unions that wish to take part in the prepayment program can pledge their desired amount to the NCUA, and the agency would then process a direct debit from those credit union accounts. The agency is accepting credit union comments on the potential effectiveness of its plan, the level of interest in the plan, and any account treatment considerations until June 20.
CUNA is urging all eligible credit unions to consider the benefits of the prepayment program and to suggest revisions as appropriate. CUNA has also compiled its own FAQ on the proposal, and has issued a corresponding comment call. Comments are due to CUNA by June 10. Use this link to access CUNA’s comment call: (http://www.cuna.org/download/rcc_052511.pdf)
The National Credit Union Share Insurance Fund (NCUSIF) was also addressed during the webinar, with NCUA Director of Examination and Insurance Melinda Love reiterating that an NCUSIF premium for 2011 is not likely. However, such a premium might be necessary in 2012, she indicated. CUNA President/CEO Bill Cheney in NCUA’s board meeting summary noted that a premium for this year is unlikely.
For more on the prepayment plan use this link: NCUA Prepayment Plan Information.
CUNA meets with CFPB on mortgage disclosure
Just two days before comments are due on the Consumer Financial Protection Bureau's (CFPB) proposed simplified mortgage disclosure document, the Credit Union National Association (CUNA) met with bureau officials to continue discussions regarding the form.
The CFPB recently released for comment its "Know Before You Owe" project, which attempts to combine the complicated documents required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single page, two-sided disclosure.
At a meeting attended by CUNA, CFPB architect Elizabeth Warren said that was the first step in a long process of gaining feedback from financial institutions, consumers and other interested parties on the new draft form. After the initial comment period ends, the CFPB intends to revise the forms five separate times between May and September, with a final version of the new form scheduled for a July 2012 release. According to CFPB transition team members, each new draft of the form will also be available for online review and comment using the CFPB's website. The CFPB is concurrently conducting consumer testing of these disclosures in both English and Spanish.
CUNA Deputy General Counsel Mary Dunn, CUNA Senior Assistant General Counsel Michael Edwards, and representatives from ten credit unions were among those that met with CFPB Assistant Director for Community Banks and Credit Unions Elizabeth Vale and other CFPB representatives. CUNA and credit union representatives will again meet with the CFPB when it releases the updated mortgage disclosure proposal.
Vale said that the CFPB wants to have frequent dialogue with credit unions as it develops new rules or revamps existing regulations. CFPB representatives during the meeting added that they would seek credit union input and follow similar development timelines in their future rulemaking projects.
CUNA has recommended that the CFPB outreach effort include a separate interview panel comprised solely of credit union lending professionals because--as not-for-profit cooperatives organized to promote thrift and make loans to members at reasonable rates of interest--credit unions are different from for-profit banks and non-depository mortgage lenders, as well as different from mortgage brokers.
SBA suggests 7(a) compliance changes
The U.S. Small Business Administration (SBA) has identified the adoption of a single electronic application for all SBA 7(a) guaranteed loans as one of several ways it could reduce compliance burdens. This 7(a) streamlining would, according to the SBA, "reduce the paperwork burden on lenders" and increase the participation of credit unions and other lenders in the 7(a) program. It would also improve the timeliness of loan approval deliveries, the SBA added.
The SBA also discussed allowing credit unions and other SBA lending partners to use an automated credit decision model for 7(a) loans of less than $250,000. Doing so could reduce the cost of delivering loans to eligible borrowers, thus expanding lender interest in making low-dollar loans. This change could also encourage new credit unions and other lenders to become SBA partners, increasing the amount of lending options for small businesses, the SBA added.
The SBA was one of 30 federal agencies that released a regulatory review following an early 2011 executive order calling on federal agencies to design cost-effective, evidence-based regulations that are compatible with economic growth, job creation, and competitiveness.
The Obama administration also instructed regulators to reduce burdens on small businesses whenever possible, called for greater transparency and accountability in regulatory compliance, and requested that regulators identify areas where regulations could be effectively harmonized to reduce costs.
The SBA said it would also explore whether adding greater flexibility to its lending criteria and increasing the participation of lenders and borrowers in underserved communities could "reduce federal barriers" for entrepreneurs working to start and grow their own businesses.
The SBA added that it would soon report on the feasibility of these and other ideas.