December 30, 2005

§ The Delaware Credit Union League welcomed Patrick Mahaney as the new League president/CEO in December. Patrick replaces Bob Walls, who left in July to become the president/CEO of the New Jersey Credit Union League.

§ U.S. House Ways and Means Committee Chairman Bill Thomas (CA) put the congressional spotlight on credit union accountability during the committee’s hearing November 3 regarding credit unions’ tax status. Earlier in the year, in February, the League delivered 6,230 credit union member signatures to preserve credit unions’ current tax status to our members in Congress.

§ Delaware credit unions held a luncheon honoring Senator Tom Carper in Washington, D.C., on October 19.

§ The League worked with Delaware credit unions to publish the annual Credit Union Week Supplement in The News Journal on October 18.

§ For 21 years in a row, credit unions have ranked higher than banks and thrifts in the “customer satisfaction” category, as reported in the 2005 American Banker/Gallup Consumer Survey, published in October.

§ Credit union response during the hurricane relief effort was described as “amazing” by Credit Union National Association president/CEO Dan Mica. Credit unions in Delaware and throughout the United States donated funds and physical and staffing support through the system’s Relief Effort and Support for Credit Unions (R.E.S.C.U.) program.

§ Credit unions’ lobbying efforts regarding bankruptcy reform finally paid off when President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 into law on April 20. CUNA, the leagues, and credit union activists lobbied for the legislation for the past decade, and all three Delaware members in Congress supported the bill.

§ Phishers, counterfeiters, and other fraudsters were busy with scams this year. The League’s risk alert system communicates important, time-sensitive information to help keep credit unions and their members from sustaining losses.

§ The enactment of the Bank Secrecy Act – combined with some anti-money laundering issues – has become one of the most difficult compliance issues currently facing credit unions. Bank Secrecy Act compliance was listed as one of the National Credit Union Administration’s regulatory hot topics in 2005.

§ The long-anticipated Credit Union Regulatory Improvement Act of 2005 (CURIA) was introduced in the U.S. House of Representatives by Reps. Ed Royce (CA) and Paul Kanjorski (PA) in May. The bill seeks to overhaul credit union regulations and improve service to members. At the end of December, 107 members of the House have become cosigners on the bill.

Member Business Loan Rule Revisions
The National Credit Union Administration (NCUA) finalized an amendment to Part 723 of its Regulations that addresses member business loans. The major change to the regulation is a new definition for the term “construction or development loan.” A construction or development loan is now defined as a financing arrangement for acquiring property or rights to property, including land or structures, with the intent to convert it to income-producing property. The new regulation contains several examples aimed at helping credit unions to properly classify such loans. The definition and examples specifically exclude loans for routine maintenance or repairs.
Board member Gigi Hyland addressed the scope of credit union construction lending. “These are not $6 million, $7 million or $100 million dollar loans. Credit union construction and development loan balances are running under $500,000 per loan.”

Final Rule: Purchase and Assumption of Assets/Liabilities & Nonconforming Investments
NCUA has finalized an amended rule regarding the purchase and assumption of assets or liabilities. A federally insured credit union must obtain NCUA approval to purchase or assume assets or liabilities from an entity that is not insured by the share insurance fund. Student loans as part of a pool to be sold on the secondary market or the acquisition of deposits as rollover of retirement accounts or where the credit union has a perfected security interest on an extension of credit with any member are exempt.

New Bank Secrecy Act Webpage
The Financial Crimes Enforcement Network (FinCEN) recently redesigned their Bank Secrecy Act (BSA) Forms and Filings Requirements webpage to make it easier to navigate and find the BSA forms you need. It includes FAQs and BSA filing details and provides a link to downloadable forms. Go to www.fincen.gov/reg_bsaforms.html to access FinCEN’s new webpage.

Fed Increases HMDA Asset-Size Exemption Threshold
The Federal Reserve Board has increased the asset size of financial institutions required to comply with the Home Mortgage Disclosure Act (HMDA) data collection requirements. The asset size will increase from $34 million to $35 million. Financial institutions with assets of $35 million or less as of Dec.ember 31, 2005, will be exempt from the data collection requirements in 2006.

Guidance on Nontraditional Mortgage Products
     The federal financial regulatory agencies, including NCUA, have issued for comment proposed guidance on residential mortgage products that allow borrowers to defer repayment of principal and sometimes interest. These nontraditional mortgage products include “interest-only” mortgage loans and “payment option” adjustable-rate mortgages.
     The proposed guidance discusses the importance of carefully managing the potential heightened risk levels created by these loans. Toward that end, management should:
§      Assess a borrower’s ability to repay the loan, including any balances added through negative amortization, at the fully indexed rate that would apply after the introductory period. The agencies recognize that this requirement differs from underwriting standards at some institutions and are specifically requesting comment on this aspect of the guidance.
§      Recognize that certain nontraditional mortgage loans are untested in a stressed environment and warrant strong risk management standards as well as appropriate capital and loan loss reserves.
§      Ensure that borrowers have sufficient information to clearly understand loan terms and associated risks prior to making a product or payment choice.
     Comment is requested on all aspects of the guidance, particularly on the section regarding comprehensive debt service qualification standards. Comments are due 60 days after publication in the Federal Register. Click here to view the guidance.

CUNA Mutual Introduces Online Tools to Support Roth 401(k)
     CUNA Mutual Group has developed a suite of online information and implementation tools for CUs interested in offering a Roth 401(k) program to their employees. Beginning Janary 1, 2006, employers can allow workers to make after-tax Roth contributions to their 401(k) plan without paying personal income taxes upon withdrawals at retirement. Credit unions can add this new 401(k) feature, made possible by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), to existing 401(k) programs through a simple plan amendment.
     Prior to 2006, 401(k) plans allowed employees to set aside pre-tax dollars that would be taxable (along with all earnings) upon distribution. Some 401(k) plans also allow employees to make after-tax contributions, with earnings taxable at distribution. All investment earnings on Roth 401(k) contributions, however, are tax-free at distribution, which could make it a valuable benefit for younger workers and higher-paid employees.
     Final IRS regulations on Roth 401(k) contributions and model language for amending plans have not been issued. In the meantime, CUNA Mutual is providing the following tools on its website to assist credit unions in determining whether a Roth 401(k) is a good fit for credit unions and their employees:
§      Employer Educational Brochure: Roth 401(k): Understanding the New Tax Option – designed to help retirement plan administrators understand Roth 401(k).
§      Employee Educational Brochure and Payroll Stuffers: Designed to educate employees about the Roth 401(k) and help them make an informed decision on whether to participate.
§      Roth 401(k) Analyzer/Calculator: This easy-to-use online calculator enables employee participants to make informed decisions on whether to designate all or a portion of their elective deferrals as pre-tax or after-tax (Roth) contributions. In addition, the Gap Analyzer component of the calculator allows participants to perform a gap analysis to determine account balances to meet retirement income needs.
     For more information, go to www.cunamutual.com or call CUNA Mutual’s Retirement Service Center toll-free at (800) 999-8786.

Bankruptcy Basics: Reducing Your Losses
With the new Bankruptcy Abuse Prevention and Consumer Protection Law of 2005 now in effect, CUNA offers a comprehensive book to help CUs understand the complexities of the revised codes and how to protect the best interests of their members, as well as the CU. Bankruptcy Basics: Reducing Your Losses is a thorough explanation of bankruptcy concepts, rules and procedures that went into effect on October 17. This resource is available to CUs for $119.95 in hard copy or $99.95 for PDF format. To order either the hard copy or the PDF version online, go to http://buy.cuna.org/ and type stock #26895 in the “Product Find” box. To order a hard copy by phone, call (800) 356-8010, press 3, and use the stock number as reference.

Consumer Lending Compliance Guidebook
This new guidebook offers a practical, hands-on approach to typical lending compliance challenges by following the lending process from the marketing phase through collections, repossessions, and bankruptcy. Solutions are based on real-life issues credit unions face concerning common lending problems and errors. While this guidebook provides guidance in compliance with lending regulations, it is written from a practical and operational viewpoint rather than just a summary of regulations. The guidebook also covers the growing areas of electronic and Internet lending.
To order this resource, go to http://buy.cuna.org/ and type stock #25350 in the “Product Find” box. To order by phone, call (800) 356-8010, press 3, and use the stock number as reference. The price is $68.95.

NCUA 2005 Examination Webinar
Sign up for CUNA’s “NCUA 2006 Examination Issues” webinar scheduled for January 24, 2006, from 3-4:30 p.m. This webinar is designed to help update CUs on the topics that will be on the regulators’ “hot list” when they walk through the door. The program is designed for CEOs, CFOs, compliance staff and volunteers. Learn about hot topics such as BSA, disaster recovery, bounce protection, and interest rate risks. Fee: $219. To enroll, call (800) 356-9655, ext 4249.

Our condolences go out to Christine Kaczmarczyk, former CEO of DEXSTA FCU, and her family and friends at the passing of her husband Raymond on December 17.

Faith Simpers, marketing director at LOUVIERS FCU, reports that the contributions of members and staff helped the CU to sponsor five needy families in New Castle County through the Adopt-a-Family Holiday Program.

[Editor’s note: If your CU participated in holiday support for your community, please call Alice Smith so we can share your outreach in the next TOGETHER.]

The News Journal featured an interview with League CEO Patrick Mahaney in the December 22 issue. Written by financial services reporter Ted Griffith, the article shows Patrick visiting with Dick Stoops during one of the meetings he is planning with each Delaware CEO/manager in the next month.

New Mid-Atlantic Corporate Services
     Mid-Atlantic Corporate now offers wholesale lockbox services to credit unions, allowing the corporate to process payments that aren’t machine readable or of an automated processing standard on behalf of CUs and business service members. CUs can provide this niche service as a payment alternative, particularly to member businesses.
    In addition, Mid-Atlantic Corporate has agreed to offer Bluepoint’s C21 Capture Solution to its CU members as a preferred in-branch solution for remote branch capture. By using Bluepoint Solutions, CU members will be able to capture digital images of their deposited checks and transmit them daily to Mid-Atlantic for processing. Mid-Atlantic Corporate will use its check image processing capabilities to process the deposited checks and make the funds available to the credit unions more quickly.
     The remote branch capture product offers a turnkey solution with all aspects of check handling in the new Check 21 environment, from scanning and truncating the paper check, saving it as a digitized image, sending and archiving the data and images, collecting the funds, and settlement.

One-hour sessions – 11 a.m.-noon
1/10         Leadership, Not Management
1/18         Overdrafts: Regulation D and Truth-in-Savings Act Changes
1/31         Loan Officer Protocol
Two-hour session – 11 a.m.-1 p.m.
1/12         Regulation CC: Check Holds and Return Rights

The fee for the one-hour sessions is $99, and the two-hour session is $169. Deadline to register: one week prior to the session. Call Bernadette to enroll.

These courses are now being offered in an “on demand” format. That is, your CU can hook into them on the Internet at the time and place you choose. In addition, the next set of live webinars:

R Risk Management Series
1/10        ID Verification
1/12        Identity Theft
1/17        Front Line Fraud
1/19        Back Office Fraud
1/24         Data Breach Management

R BSA Training
1/26        Bank Secrecy Act
1/31        USA Patriot Act
2/2           CTR/SAR Forms Completion
2/7           OFAC, FinCEN, CTR Forms

R ACH Management Series
2/9           Annual ACH Audit
2/14         ACH Risk Management
2/16         ACH Payments/Verification

Each session begins at 2 p.m., and the fee is $125. For more information, phone Don Baumann of the co-sponsor Verisure at (315) 638-4334.

Reception in Honor of DCUL President/CEO Patrick Mahaney – Monday, January 9, from 5:30-7:30 p.m. at the Delaware State Troopers’ Association , 6349 Dupont Highway, Cheswold. R.S.V.P. to Ruth Lawley by January 3.

CEO Summit – Cosponsored with our neighboring leagues. January 14-17 in Naples, Florida. Registration fee is $550. Call Alice Smith for a brochure.

Financial Management Training & Council: “ALM for Decision Makers (Don’t Let Examiners Make Decisions for You” – Wednesday, January 25, from 9 a.m.-noon at the League office. Speaker: Carolyn Warden. Fee: $75 for non-council members. Registration deadline: 1/20/06.

Volunteer Board Training: Five or More Things Every Director Should Know – Wednesday, January 25, from 5:30-8:30 p.m. Speaker: Carolyn Warden. Fee: $80, which includes a light meal. Registration deadline: 1/18/06.

February 26-March 1 at the Washington Hilton. Registration fee until January 20 is $729. CUs under $20M in assets pay half price. For program information, visit www.cuna.org and look for GAC 2006.