GA Update - November 2008
2008 General Election Recap
As expected, Michigan voters easily delivered the state’s 17 electoral votes to Democratic Sen. Barack Obama with a 57 percent to 42 percent margin over Republican Sen. John McCain. In two of the most closely watched U.S. House races, first term Rep. Tim Walberg (R-Tipton) in the 7th Congressional District and eight term Rep. Joe Knollenberg (R-Bloomfield Hills) in the 9th Congressional District lost. In the 7th District, State Senate Minority Leader Mark Schauer (D-Battle Creek) defeated Walberg 49%-46%; in the 9th District, former State Senator and former Lottery Commissioner Gary Peters (D-Bloomfield Hills) defeated Knollenberg 52%-43%. Michigan’s U.S. House delegation will now consist of 8 Democrats and 7 Republicans; a change from the 9-7 Republican advantage. The nine other Michigan incumbent CURIA co-sponsors retained their seats in Congress. In addition, U.S. Senator Carl Levin (D) cruised to an easy victory for his 6th term over term limited State Rep. Jack Hoogendyk (R-Kalamazoo). In the State House, all 110 seats were before the voters. The Democrats gained 9 seats and will hold a 67-43 majority when the 95th Legislature convenes in January. This will be largest majority the Democrats have enjoyed since the 1964 election. The following are the seats that switched from Republican to Democrat with the name of the current, term-limited member in parenthesis:
1st District (Gaffney) D-Tim Bledsoe
21st District (LaJoy) D-Dian Slavens
24th District (Brandenburg) D-Sarah Roberts
32nd District (Acciavatti) D-Jennifer Hasse
39th District (D.Law) D-Lisa Brown
62nd District (Nofs) D-Kate Segal
101st District (Palsrok) D-Dan Scripps
108th District (Casperson) D-Judy Nerat
For more comprehensive results on all the races in Michigan, including the ballot proposals, go to: http://miboecfr.nictusa.com/election/results/08GEN.
Senate Democrats Choose Prusi as New Leader
The State Senate Democratic Caucus has chosen Sen. Mike Prusi (D-Ishpeming) as their new leader heading into the 95th Legislature. Prusi’s selection comes as a result of the current leader, Sen. Mark Schauer (D-Battle Creek), winning his election to the 7th District of the U.S. House of Representatives. Prusi who lost his bid for Minority Leader two years ago against Schauer, is serving his second term in the Senate and he is the Minority Vice Chair of the Finance Committee. Sen. Buzz Thomas (D-Detroit), who was defeated in a caucus vote for the top spot, is staying on as Floor Leader.
Dillon and Angerer to Lead House Democrats
In quick action just two days following the election, Rep. Andy Dillon (D-Redford) was reelected as Speaker of the State House of Representatives. Rep. Kathy Angerer (D-Dundee) who has served as Assistant Majority Floor Leader this past session was elected Majority Floor Leader going into the 95th Legislature. Additionally, current Associate Speaker Pro Tempore, Pam Byrnes (D-Chelsea) was elected Speaker Pro Tempore to preside over House session. Other leadership positions have yet to be decided. Dillon, Angerer, and Byrnes will begin their third and final terms in January.
House Republicans Select Elsenheimer as Leader
On November 13th, the State House Republican Caucus selected Rep. Kevin Elsenheimer (R-Bellaire) to lead them in the 95th Legislature. Elsenheimer, an attorney, will begin his third and final term in January. He most recently has been serving as the Assistant Minority Leader for the caucus. Finishing second in the balloting was Rep. Brian Calley (R-Portland) who is a member of the Banking and Financial Services Committee. Calley will begin his second term in January. The current Minority Floor Leader, Rep. Dave Hildenbrand (R-Lowell), will continue in his post.
The remainder of the House Republican Leadership team includes:
Assistant Minority Leader: Rep. Arlan Meekhof (R-West Olive)
Assistant Minority Floor Leader: Rep.-elect Bill Rogers (R-Brighton)
Caucus Chair: Rep.-elect Eileen Kowall (R-White Lake)
Assistant Caucus Chair: Rep.-elect Larry DeShazor (R-Kalamazoo)
Minority Whip: Rep. Kevin Green (Wyoming)
Home Foreclosure Prevention Act Passes House
On November 13th the State House of Representatives passed the Home Foreclosure Prevention Act. The MCUL testified in support of the bills before the House Banking and Financial Services Committee, with some questions of concern that were raised by credit union members. House Bill 6615 seeks to provide some relief to homeowners who have subprime loans, by allowing the OFIR Commissioner to review these loans prior to foreclosure, provide for a delay to foreclosure, and to possibly order mediation to determine whether other options exist including loan workouts. The bills were amended to include a number of changes suggested by the MCUL including reducing the timeframe for delaying foreclosure from up to 90 days to not more than 30 days. In addition, some of the terms for the mediation process were outlined including the fact that it would be nonbinding, it shall be conducted by a designee of the commissioner, it may be terminated if a resolution is unlikely, and the foreclosure extension may be rescinded if a borrower fails to appear for mediation. Finally, House Bill 6614 states that if a foreclosure extension is provided, the redemption period will be reduced by the same number of days. For more information and to view the legislation, go to:
http://www.legislature.mi.gov/(S(bor2fqreui4qeu45umexvu2y))/mileg.aspx?page=getobject&objectname=2008-HB-6614
http://www.legislature.mi.gov/(S(d114m545xow2kf55enqbd0qe))/mileg.aspx?page=getobject&objectname=2008-HB-6615
Senate Banking Committee Moves Foreclosure Information Bill
Homeowners who are seeking to redeem their foreclosed homes would be able to obtain the payoff information from county registers of deed or county clerks under Senate Bill1390 sponsored by Sen. Nancy Cassis (R-Novi). Until 2005, clerks and registers had been able to provide this information for a nominal fee, however it is capped at $50 in the legislation. The MCUL took a neutral position on this bill. If the register of deeds incorrectly determined the amount necessary for payoff, and the correct amount were less than $50 more than the incorrectly determined amount, the applicable redemption period would be extended by five days. The register of deeds would have to mail notice of the extended redemption period to the purchaser and every person known to the purchaser to have a right to redeem the property. For more information and to view the legislation, go to: http://www.legislature.mi.gov/(S(d114m545xow2kf55enqbd0qe))/mileg.aspx?page=getObject&objectName=2008-SB-1390.
House Introduces Bill to Encourage Purchase of Foreclosed Homes
On October 29th, Rep. Richard LeBlanc (D-Westland) introduced House Bill 6589. The bill would provide buyers of foreclosed residential properties an income tax credit equal to the amount of the Principle Residence Exemption for that purchased property after May 1 of the given year. The credit would be determined by the property’s taxable value and the 18 mills that are assessed against residential property. As an example if a home has a taxable value of $100,000, the income tax credit could be $1,800 depending on when, during the year, the home was purchased. HB 6589 has been referred to the Tax Policy Committee, chaired by Rep. Steven Bieda (D-Warren). For more information, go to: http://www.legislature.mi.gov/(S(g240qp55fcz3qe454mizeuez))/mileg.aspx?page=getObject&objectName=2008-HB-6589.
Senate Banking Chair Randy Richardville Featured in Video Podcast
Sen. Randy Richardville (R-Frenchtown Twp.) recorded a video podcast with MCUL President/CEO Dave Adams on November 6th. The podcast was recorded in Lansing and will be posted on the League’s website at www.mcul.org. Sen. Richardville was elected to the Senate in 2006 and his serving his first term. Prior to coming to the Senate, Richardville served three terms in the Michigan House, including a term as the Majority Floor Leader. Especially important to credit unions, is that Sen. Richardville is the Chair of the Banking and Financial Services Committee. Sen. Richardville has been a great supporter of credit unions and introduced the Credit Card Merchant Liability Bill. For more information on Sen. Richardville, please go to: http://www.senate.michigan.gov/gop/senators/about.asp?District=17.
PAC Fundraising Continues on Strong Note
MCULAF (state PAC) has surpassed its goal for 2008 of $150,000 with $155,380 raised thus far this year. MCULLAF (federal PAC) has reached 85% of the 2008 goal raising $232,929 thus far this year. We have seen a very large jump in credit union fundraising participation in 2008 with 239 different credit unions around Michigan taking part. The Battle Creek, Blue Ox, Jackson, Mid-Michigan, and Oakland County Chapters have all surpassed 100% of both their Chapter state and federal PAC goals. For more detailed information and individual credit union fundraising reports please visit http://www.mcul.org/PAC_Fundraising_Goals_Report_566.html.
2008 Grand Raffle Update
The 2008 Grand Raffle has been a tremendous success building off of a record year in 2007. Credit unions from around Michigan pushed through the tough economic climate and managed to increase tickets sales for this year. We have received 25,233 sold tickets raising $126,165. Congratulations to all 130 credit unions that participated and keep an eye out for the drawing which will be held at 10 am Monday, November 24th at the current Northville office located at 15800 North Haggerty Road.
OFIR Town Hall Meetings
OFIR Commissioner, Ken Ross, will be conducting two Town Hall style meetings with Michigan credit unions on Wednesday, December 3, 2008. The morning session will be hosted by Rob Bava at Community Choice Credit Union in Farmington Hills and will run from 9 am to 11 am. Following this session, the Commissioner will head over to Grand Rapids for the afternoon session, from 2 pm to 4 pm, hosted by Andy List at Option 1. State chartered credit unions are especially invited, but interested federal credit unions should also consider attending. Registration is requested, so we may plan the setup. For more information, contact Mike DeFors or Jami Wolfe at the League at 800-262-6285.
NCUA Meets with League Reps and Reg Affairs Staff
The second and final 2008 meeting between NCUA supervisory examiners, Jeff Pike and Andrew Healey, and MCUL’s League Representatives and Reg Affairs staff was held at MCUL’s Lansing office on October 28th. The two hour meeting reviewed regulatory trends and NCUA concerns as well as how the MCUL can work with the agency to assist troubled credit unions. An email summarizing the meeting was sent to all affiliated credit unions the following day. Meetings will again be scheduled in 2009, in the spring and fall, with both NCUA and OFIR. Notices will be sent ahead of time to affiliated credit unions seeking input for these meetings.
Rescue Bill Webpage Created on MCUL Website
Because of the high interest in this federal legislation, an information page was created on the MCUL website. A section by section description created by staff counsel, Veronica Madsen, is available regarding the pertinent provisions, as well as CUNA’s major points summary. As new guidance is developed, additional information will be added. The page can be found in the “Hot Topics” section of the MCUL homepage under Financial Rescue Bill at: http://www.mcul.org/Financial_Rescue_Bill_Information_1897.html
NCUA Share Insurance FAQ
A second share insurance FAQ was recently distributed to member credit unions and is now available in the Regulatory Affairs webpage under Compliance Communications. This FAQ is entitled, “Share Insurance Part II – Advertising,” and covers the essential elements required under NCUA regulations including recent rule changes prompted by the temporary increase in account coverage from $100,000 to $250,000. The first Share Insurance FAQ was issued in August and reviewed insurance coverage by account category with a typical example. The MCUL Compliance Communications page (password protected) contains all archived FAQs and can be found at: http://www.mcul.org/FAQs_546.html
OREO Accounting to be Subject of InfoSight Newsletters
The four November issues of the weekly InfoSight newsletter will include a podcast interview with OFIR CU Division Assistant Director, John Kolhoff, on the proper accounting for property received as a result of foreclosure. Many credit unions find themselves in foreclosure situations they have not had to deal with on any kind of large scale. This guidance is intended to assist them in understanding essential accounting requirements as a foreclosed loan moves through the acquisition phase, the holding phase, and finally the disposition phase. Even though this guidance is not deemed an official OFIR release similar to a Bulletin or Letter to Credit Unions, the agency strongly encouraged MCUL to disseminate it to our credit unions. It will be posted and available on InfoSight’s “Loans and Leasing” channel. NCUA was invited to also provide similar guidance and will notify MCUL when it is available.
FINAL RULES
Display of Official NCUA Sign for Temporary Insurance Increase – Part 740. Official Advertising Statement – Part 740. NCUA issued an Interim Final Rule that provides guidance on advertising share insurance during the temporary increase in coverage from $100,000 to $250,000 for all federally insured credit unions. Because of the temporary nature of the increase, NCUA offers the following options for advertising coverage: 1) make no changes to current signage without penalty, 2) use the new signage NCUA will issue or make available on its website, 3) alter current signs with a sticker or otherwise so long as it is legible, and 4) keep current signage, but post additional signage in lobbies explaining the change. It also discusses coverage of custodial loan accounts. The Rule is effective October 22, 2008 and can be read in its entirety at:
http://www.ncua.gov/RegulationsOpinionsLaws/RecentFinalRegs/smsia%20increase%20offical%20sign%20interim%20october%202008.pdf
Incidental Powers – Part 721. This Final Rule, effective November 21, 2008, updates a federal credit union’s incidental powers by adding illustrations of permissible activities under three categories: Correspondent Services, Operational Programs and Finder Activities. The Rule provides that under Correspondent Services, these services may be offered to foreign as well as federal or state-chartered credit unions. Under Finder Activities, a FCU may negotiate group discounts and perform administrative functions for outside vendors. And under Operational Programs, a FCU may now offer payroll services. The Final Rule can be found at: http://www.ncua.gov/RegulationsOpinionsLaws/RecentFinalRegs/721finalruleweffecdate.pdf
NCUA Regulatory Alerts
- None issued in this time period -
NCUA Proposed Regulations
Notice of Insured Status – Second Sign Requirement. This proposal would impact all federally insured credit unions and allow for a change with respect to the requirement to post a second sign adjacent to the official NCUA sign that lists each federally insured credit union served by the teller along with a statement that only these credit unions are federally insured. Due to the evolution of shared branch networks, it is difficult to ensure accuracy with this requirement. Thus NCUA is proposing to revise the rule to replace the required “listing of credit unions” with a statement that not all of the credit unions served by the teller are federally insured and that members should contact their credit union if they need more information. The comment period ends November 21 and the proposal can be found at: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/Proposed%20rule%20text%20740%204%20for%20web.pdf.
RegFlex Proposal re Acquiring Unimproved Land for Expansion. This proposal would provide additional flexibility to qualifying federal credit unions when acquiring unimproved land for future expansion. Currently, when an FCU acquires unimproved land for future expansion and does not fully occupy the completed premises within a year, it must partially occupy the completed premises within three years or obtain a waiver. The proposal would increase the three years to six years for RegFlex FCUs without the need to obtain a waiver. For further information see:
http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/742-reg-flex-fixed_assetpro.pdf.
NCUA Letters to Credit Unions
Identity Theft Red Flags and Consumer Reports Address Discrepancies and Records Disposal Procedures AIRES Questionnaires (08-CU-24). This is a Letter to all federally insured credit unions issued in October 2008 that provides a copy of the AIRES Questionnaires for the two topics above. The questionnaires will help examiners evaluate the quality and effectiveness of both sets of plans. Federal credit unions are reminded that the compliance date for both the Identity Theft Red Flags and Address Discrepancies Rules was November 1, 2008 notwithstanding the six month compliance enforcement deadline extension announced by the Federal Trade Commission that impacted state chartered credit unions. A link to the Letter: http://www.ncua.gov/letters/2008/CU/08-CU-24.pdf.
Central Liquidity Facility (08-CU-23). This is a Letter to all federally insured credit unions reemphasizing the availability of funds for various liquidity needs through NCUA’s Central Liquidity Facility. It outlines two broad criteria for lending…that 1) a credit union must be creditworthy and 2) that it adequately demonstrate liquidity needs as defined in the Federal Credit Union Act. Further, the Letter discusses the process for applying for loans, either directly if the credit union is a member of the Facility, or indirectly through one of CLF’s agents, typically a corporate credit union. Link to the Letter: http://www.ncua.gov/letters/2008/CU/08-CU-23CLF%20Letter%20to%20Credit%20Unions%2008-CU-23.pdf.
Share Insurance Coverage Enhancements (08-CU-22). This is a Letter to all federally insured credit unions issued in October 2008 that outlines various matters relating to the temporary increase in share insurance account coverage from $100,000 to $250,000 through December 31, 2009. Also referenced is the change in NCUA rules regarding revocable living trust accounts removing the need to name only “qualifying beneficiaries” and outlining coverage in scenarios involving large trust accounts with 5 or more beneficiaries. Also noted was the Share Insurance Tool Kit available on the NCUA website. Link to the Letter: http://www.ncua.gov/letters/2008/CU/08-CU-22.pdf.
NCUA Legal Opinions of Interest
Federal Mortgage Licensing Act of 2008 (08-0843). This opinion, issued Oct 3, 2008, outlines various aspects of the new mortgage loan originator licensing and registration requirements. A loan originator is governed by the activities performed, not by the title. Thus any staff engaged in substantive discussions with a loan applicant, including discussion of rates and terms and substantive options, as opposed to merely performing administrative or clerical tasks would be covered. Loan originators of credit unions must only be registered. However, loan originators housed in CUSOs must be registered and licensed. Note: More information is expected regarding the creation of a nationwide registration system. For a copy of this Opinion see: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0843.pdf.
Permissible Arrangements Involving ATM Providers (08-0735). This opinion issued Oct 3, 2008 discusses an arrangement whereby a federal credit union, for a fee, would provide cash to stock a third party’s ATMs over a seven county region with some locations a great distance from the FCU’s nearest branch. The ATMs would be available for general public use. The Opinion denied this activity saying that while there are many activities permitted involving ATM services under NCUA’s incidental powers regulations this activity is not one of them. Thus the activity as outlined is not permitted as a credit union business service under the incidental powers rules, nor as a marketing arrangement, nor as an initiative to extend outreach to persons outside the mainstream. See Opinion at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0735.pdf.
Insurance Coverage for Interest on Lawyer Trust Accounts (08-0840). This Opinion issued Oct 8, 2008, sets forth the basis for insurance coverage of client funds held in an IOLTA account generally. Some states require a lawyer that is holding funds that belong to a client even for a short period of time to deposit them in what are called Interest on Lawyer Trust Accounts (IOLTA) and the interest earned is typically forwarded to that state’s Bar Foundation. Despite legal challenges to this concept, this arrangement has been historically upheld by the courts. This Opinion outlines the rule that states that funds of clients who are members of the credit union are insured by NCUSIF, but funds of non members are not. However, if the credit union is designated as low-income, and thus permitted to serve non-members, then those client funds belonging to non-members would also be insured. See Opinion at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0840.pdf.
Safekeeping of Investments (08-0917). This Opinion issued Oct. 8, 2008, would permit a wholly owned subsidiary of a registered bank holding company to act as an investment safekeeper for a federal credit union. Bank holding companies are regulated by the Federal Reserve and thus qualify under NCUA investment regulations Part 703.9. Of course the credit union board would have to approve this action among other requirements described in the Opinion found at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0917.pdf
Attorney-Client Privilege. This Opinion issued Oct 21, 2008 comes from NCUA General Counsel, Mr. Robert Fenner to CUNA Deputy General Counsel, Mary Mitchell Dunn, and does not carry a number designation. In it, Mr. Fenner discusses NCUA’s longstanding authority to have full access to credit union records regardless of whether the credit union asserts attorney client privilege. Further, that the action of a credit union submitting privileged information to the Agency in the course of any supervisory or regulatory process does not waive, destroy or otherwise affect any privilege such person may otherwise claim. This opinion is based on Sec. 205(j) of the FCUA. This Opinion is available at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-1032.pdf
Extension of Red Flag Enforcement for FCUs (08-1040, 1040a and 1040b). These three Opinions issued in late Oct 2008 by Mr. Robert Fenner, NCUA General Counsel, one each to CUNA, NAFCU and the Washington Credit Union League all support the position that NCUA will adhere to the original compliance deadline of November 1, 2008 for the Red Flags Rule. This means it would not extend the deadline for federal credit unions similarly to the action taken by the Federal Trade Commission whose pronouncement affected state-chartered credit unions and not federal credit unions. The Opinion to CUNA is available at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-1040b.pdf
OFAC Updates SDN List
Credit unions are reminded that the OFAC SDN lists have been updated through November 3, 2008 with changes, new entries and removals primarily from Iran, Columbia, Venezuela, Mexico, Libya and the United Kingdom. The full 2008 listing can be found at: http://www.ustreas.gov/offices/enforcement/ofac/sdn/t11sdnew.pdf
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Regulatory Affairs
