hot topics 2011
DESCRIPTION
Gary Hess presented "Hot Topics" at CUConferences 2011 Spring Training conference.TRANSCRIPT
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DependabilityExperienceSimplicityValue
Hot TopicsSpring Training
Conference 2011
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Agenda:Why Does it Matter?
Regulatory Changes
Discussion Intellectual Property IssuesLending DeclineGoing mobileOther
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Why does it matter?
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Why Does it Matter?It is part of the responsibility
taken on by directors. Federal Credit Union Bylaws Article VI. Section 6.
The board has the general direction and control of the affairs of this credit union and is responsible for performing all the duties customarily performed by boards of directors.
Directing the affairs of the credit union in accordance with the Act, these bylaws, the rules and regulations and sound business practices.
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Why Does it Matter?Regulatory issues impact virtually every aspect of the operation of the credit union. It also impacts the financial performance of the credit union.
Cost of Privacy Disclosures, Regulation E Overdraft Disclosures, etc.
Cost of non compliance: Civil Money Penalties for BSA, HMDA and OFAC violations.
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Why Does it Matter?
• Letter to Credit Unions 11-CU-01
In addition, NCUA has long held that every credit union should exercise appropriate due diligence in managing the risks associated with each area of credit union operations. It is imperative that the board of directors and management of every credit union review the credit union’s foreclosure process to ensure that the following elements are in place:
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Letter to Credit Unions 11-CU-01• Appropriate policies and procedures for all aspects of the foreclosure process,
tailored to comply with the laws of each state the credit union does business in;
• Experienced and knowledgeable staff qualified to handle foreclosures;
• Effective internal controls surrounding the foreclosure process;
• Adequate oversight, due diligence, and control of third-party servicers performing foreclosures on behalf of the credit union;1
• Legally compliant documentation to support foreclosure actions; and
• Appropriate reporting to the board of directors of the number and volume of foreclosure actions and their financial impact on the credit union.
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NCUA BudgetChairperson Matz statement in 12/10 newsletter:
This situation caused us to re-evaluate NCUA’s resource needs as well as examination procedures. As a result, NCUA hired 57 field staff this year. To be effective, however, the field staff needed to be reinforced by more frequent exams. We, therefore, began examining credit unions at least annually. By conducting more frequent exams and increasing off-site supervision, we are identifying issues earlier.
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Regulatory Changes Director Financial ResponsibilityDirector Liability Dodd – FrankSafe Act 20112010
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Director Financial Responsibility
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NCUA Financial Proficiency for Directors
NCUA Regulation Section 701.4 Effective January 27, 2011 Mandatory compliance is July 27, 2011
Directors Affected – ALL Elected, appointed, serving prior to January 27th
must comply by July 27th
Elected or appointed after January 27th must comply within 6 months following seating
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NCUA Section 701.4(b)(4)
(4) Direct management’s operations of the Federal credit union in conformity with the requirements set forth in the Federal Credit Union Act, this chapter, other applicable law, and sound business practices.
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NCUA Financial Proficiency – what is required?
Working familiarity with basic finance and accounting practices
Read and understand a federal credit union’s balance sheet
Read and understand a federal credit union’s income statement
Ask, as appropriate, substantive questions of management and auditors (internal/external)
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Director Liability
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NCUA Director Indemnification
NCUA Regulation Section 701.33 Effective January 27, 2011 Mandatory compliance is January 27, 2011
Directors Affected – ALL
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NCUA Limited Exemption from suit for Directors
A Federal credit union may not indemnify an official or employee for personal liability related to any decision made by that individual on a matter significantly affecting the fundamental rights and interests of the Federal credit union’s members where the decision giving rise to the claim for indemnification is determined by a court to have constituted gross negligence, recklessness, or willful misconduct.
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Regulatory Changes
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Dodd – Frank
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Dodd – Frank FRB Calendar 24 – Passage to January 2011
12 – January 2011 to March 2011
27 – April 2011 to June 2011
See Link in Resource Section
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Dodd – Frank Consumer Financial Protection Board Deposit Insurance
Permanent $250,000 Coverage
Unlimited Coverage??
Increased consumer coverage to $50,000 under Truth in Lending
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Dodd – Frank: HMDA The number and dollar amount of points and fees Prepayment penalty information The parcel number and value of the property
securing the loan The loan’s term (in months) The channel through which the application was
received A SAFE Act unique identifier The applicant’s credit score
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Dodd – Frank: Mortgage Must hire a licensed appraisal management
company “Qualified Mortgage” concept Yield Spread Premium compensation
eliminated Home Valuation Code of Conduct Replaces
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Dodd – Frank: Other Deposit Insurance on non-interest bearing
transaction accounts Financing of credit insurance or debt
cancellation policies
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S.A.F.E. Act
Secure and Fair Enforcement for Mortgage Licensing Act of 2008
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S.A.F.E. Act Application
• NCUA rules apply to federal credit unions and privately insured credit unions
• State chartered credit unions and cuso employees are subject to state licensing through NMLS
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S.A.F.E. Act Requirements•Financial institutions must adopt and follow written policies and procedures designed to assure compliance with these requirements.
•Financial institutions must require employees acting as residential mortgage loan originators to comply with the S.A.F.E. Act's requirements to register and obtain a unique identifier;
•For purposes of the registry, each mortgage originator must obtain a unique identifier, and maintain the registration
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S.A.F.E. Dates
• NCUA Regulations effective – October 1, 2010
• NMLS Begins accepting Registrations from MLOs – January 31, 2011
• MLOs must register – 180 days after registration becomes available
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S.A.F.E. Act Definitions
• Mortgage loan originator – i) Takes a residential mortgage loan application; and
(ii) Offers or negotiates terms of a residential mortgage loan for compensation or gain:
(iii) make more than 5 mortgage loans a year
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S.A.F.E. Act Key Elements
• Mortgage loan originator (MLO)
• Must be registered, not licensed
• Registration is with the Nationwide Mortgage Licensing System and Registry (http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx)
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S.A.F.E. Act Key Elements
• MLO to provide: Fingerprints
Information for background checks
Receive unique identifier
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S.A.F.E Act Credit Union Req.• "follow on" check of the data that has been
entered into the national system. The institution will be responsible for the accuracy of the data the individual LO entered.
• Institutions must enter specific data into the system so that the LO as well as the institution are properly registered.
• the nature, size, complexity, and scope of their mortgage lending activities.
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Additional Regulations
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FACT ActRisk Based Lending Disclosures
NCUA Regulatory Alert 10-RA-15 Eff. Date: January 1, 2011
Do you offer Risk Based Pricing Loan Programs?
Do you use Credit Scores to determine APR offered to each member?
Model Disclosure Forms included
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Unlawful Internet Gambling Enforcement Act
•Effective Date: June 1, 2010
•Internal procedures
•Reliance on external procedures (credit card systems)
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Privacy “Opening Day” – January 1, 2011
Effect – past model forms no longer provide “safe harbor” is used
New model form, if used properly, does provide “safe harbor”
No substantive rights changes
New model form builder available at: http://www.federalreserve.gov/bankinforeg/privacy_notice_instructions.pdf
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Regulation E – Overdraft RulesOpt in Requirement for Overdraft Protection Plans
July 2010 Implementation for new members
August 15, 2010 Implementation for existing members
How did it go for you??
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Discussion
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Intellectual Property Issues Trademark Infringement
Michigan First Credit Union and First Michigan Bank (service mark for Michigan First)
Patent Troll – law suits filed for infringement of patent on message alerts
Process patent infringement – process for ordering customized branded merchandise over a computer network
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Lending Decline Stats
2010 – Loan portfolios declined by 1%; first time in 30 years. (CUNA)
2010 – Savings balances increased by 4.5% (CUNA)
What to do about “the squeeze”?
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Going Mobile
Web services?
iPad Apps?
Mobile Apps? Free or charge for it?
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ALDS – Game 1
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Resources
• FFIEC S.A.F.E. Act FAQ’s http://www.ffiec.gov/safeact.htm
• Nationwide Mortgage Licensing System http://mortgage.nationwidelicensingsystem.org/Pages/
default.aspx
• NCUA SAFE Act Letter to Credit Unions 10-CU-13
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Resources
• NCUA Regulatory Alert 10-RA-15 http://www.ncua.gov/Resources/RegulatoryAlerts/Files/
2010/10-RA-15.pdf
• FRB Dodd-Frank Calendar http://www.federalreserve.gov/newsevents/
reform_milestones.htm