MARCH 21, 2014
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State Legislature Adjourns! (Issue 1 of 6)
The Georgia Legislature finished up its 2013-14 session at midnight on March 20, but a pair of bills of credit union interest passed last week and were unaffected by the frenzied final days.

  How You Can Make a Difference (Issue 2 of 6)
The end of the legislative session offers credit union advocates the chance to build relationships with lawmakers by offering a "thank you" for their service in the Legislature.

  Flood Insurance Bill Passes Congress (Issue 3 of 6)
The U.S. Senate voted to approve a bill delaying planned increases in federal flood insurance premiums. The bill, previously approved by the House, now goes to President Obama to be signed into law.

  Housing Finance Reform Draft Includes Change for CU Concerns (Issue 4 of 6)
Senate Banking Committee members announced they had agreed on a proposal to reform the housing finance market; the draft bill includes a provision that would allow credit unions access to the secondary mortgage market.

  Loan Parity Bill to Help CUs Support Affordable Housing (Issue 5 of 6)
A bill introduced in the U.S. House would allow credit unions to make more loans for purchase of rental residential properties, and would address a disparity in how credit unions and banks are treated with regard to such loans.

  Insight Into NCUA Board Nominee (Issue 6 of 6)
NCUA Board nominee J. Mark McWatters told Senate Banking Committee members that risk-based capital "makes sense" and that the issue would be high on his list of priorities if his nomination to the board is confirmed.

Sine dieState Legislature Adjourns! (Issue 1 of 6)

This week the state Legislature held marathon hours for their final two days of the session, adjourning as of midnight on Thursday, March 20th in a flurry of activity with multiple amendments and amendment attempts onto bills still traveling through the process. And this was amidst the various protest groups on different issues this week! With long hours, frayed nerves and near exhaustion with some legislators, it was not an “ideal” lobbying environment for any interest group. However, from a credit union perspective the two high-profile bills of importance to the industry passed the entire legislative process last week, and were not caught up in the unpredictability of the final days:

  • HB 824 by Rep. Richard Smith (R-Columbus), which will bring consistency and clarity to overdraft programs at state-chartered credit unions and banks, and asserts that overdraft fees are not subject to usury laws and are not considered interest.
  • HB 809 by Rep. Bruce Williamson (R-Monroe), which addresses the growing threat of patent trolls and helps protect credit unions and other businesses from lawsuits by those entities utilizing low-quality patents.
Even with the above bills on their way to the governor prior the final days, there were many issues of interest addressed this week. In all, there were more than 3,200 pieces of legislation introduced during this two-year session, and almost 250 of these required active monitoring as they could impact credit unions in Georgia. In the last two days, bills needed to be watched carefully as change happens rapidly and often behind closed doors. Please watch for next week’s Legislative Update for a final wrap-up for all the issues of credit union interest.

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MeerkatsHow You Can Make a Difference
(Issue 2 of 6)

Interested in the state session? Congress? Politics in general, or not at all? It doesn’t matter what your level of interest is, ALL of us can make a difference and help shape legislation by making a connection and building a relationship with elected officials. And with the close of the state session literally mere hours ago, now is an ideal time to connect.

Why is this important to your credit union? The likelihood for legislative success is proportional to the relationship a legislator has with the industry and the understanding of the issues. As such, it is important for people in credit unions to engage with their legislators as these are the individuals who can decide how you serve your members. And, it is important to engage with your legislators EARLY. Your time establishing personal relationships with legislators creates understanding. It increases the likelihood that they will listen on issues. And, it gives you credibility with other lawmakers and within your community, regardless how high of aspirations a legislator may have. Engage with your legislators early and often; it creates its own positive domino effect for your credit union and the entire industry.

Not sure how to get started? Many credit union leaders continually grow their personal connections with legislators throughout the year by engaging them in credit union events and at civic functions. However, an easy way to get started is to simply reach out to your legislators with a “thank you” for their time serving in the state Legislature, regardless of political party affiliation. To access your legislators please click here.

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FloodFlood Insurance Bill Passes
Congress (Issue 3 of 6)

The Homeowner Flood Insurance Affordability Act (H.R. 3370) has moved to President Barack Obama's desk to be signed into law after the Senate approved the bill on March 13th. The Senate approved the bill on a 72-22 vote, and passed the House earlier this month by a 306-91 vote. The bill would delay planned increases in National Flood Insurance Program (NFIP) premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably. A range of other NFIP fixes has been discussed in recent months, and NCUA joined the Federal Reserve, the Farm Credit Administration, the FDIC and the OCC to ask whether federal financial regulatory agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers. The joint agency proposal would:

  • Require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for a statutory exception;
  • Result in new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement;
  • Clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage after a homeowner's private insurance lapses or becomes insufficient; and
  • Outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.
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U.S. CapitolHousing Finance Reform Draft Includes Change for CU Concerns
(Issue 4 of 6)

On March 11th, Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo announced they reached an agreement on a housing finance reform proposal after a series of hearings since last fall. With the release of the Johnson-Crapo housing finance reform details, CUNA has confirmed an important modification for credit unions from an earlier draft: The cap for membership in a mutual securitization company was drastically increased, as recommended by credit union testimony last November and in subsequent meetings with legislative staff on Capitol Hill. The Johnson-Crapo draft bill is lengthy; 425 pages of reforms on how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac.

CUNA supports housing finance reform but has insisted throughout discussions that credit unions must continue to have unfettered access to the secondary market under any revised system. CUNA backed an idea found in an earlier bill, S. 1217, which proposed a mutual securitization company to provide credit unions and other smaller lenders access to securitizing their mortgages, access currently provided by Fannie Mae and Freddie Mac. However, CUNA had criticized a $15 billion-in-assets cap for participation in the mutual to be far too low. As CUNA Chief Economist Bill Hampel emphasized during one of the hearings: "We believe that this cap is far too low, and would suggest that lenders of almost any size should be able to use the mutual, so long as they do not themselves issue covered securities. Restricting the mutual to serving just smaller lenders would preclude achieving necessary scale economies." The Johnson-Crapo bill raises the proposed ceiling to $500 billion in assets – a half-trillion dollars – large enough to serve as a robust vehicle to the secondary market for credit unions. 
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HousingLoan Parity Bill to Help CUs Support Affordable Housing (Issue 5 of 6)

Enactment of the Credit Union Residential Loan Parity Act (H.R. 4226) would enable credit unions to better meet the needs of their members and also would contribute to the availability of affordable rental housing. A new bill introduced by Reps. Ed Royce (R-CA) and Jared Huffman (D-CA), if passed, would amend the Federal Credit Union Act to exclude from the 12.25%-of-assets member business lending cap any credit union residential loans made for the purchase of a one- to four-unit, non-owner-occupied residential dwelling. The bill would address an existing disparity in the treatment of those loans made by banks as compared to those made by credit unions. 

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McWattersInsight Into NCUA Board Nominee
(Issue 6 of 6)

NCUA board member nominee J. Mark McWatters said at his confirmation hearing on March 13th that a risk-based capital approach "makes sense" for credit unions, but warned the "devil is in the details" of any proposal. He told Senate Banking Committee members that examining the overall issue in general and the NCUA's proposal specifically would be high on his list of priorities if he is confirmed to join the NCUA board.
That proposal, issued in January, was one of many regulatory issues the potential NCUA board member brought up in response to a question from the committee's chairman, Sen. Tim Johnson (D-SD). Overregulation of small credit unions is another challenge, he said, adding that the NCUA has made some progress in this area, but more needs to be done. The principal challenge for credit unions and the credit union system, McWatters stated, is to look to the future and anticipate the next systemic shock. This applies to both credit unions and banks, he noted, and said that while regulators look for future problems, they must also exercise judgment. "If you are always crying wolf, you'll be considered a flake," he said.
The greatest opportunity for credit unions, the NCUA nominee asserted, is to continue doing what they are doing now. Credit unions' membership and loan base are growing, and many low-income credit unions have the chance to expand their mandate to those who are underbanked and unbanked. Underbanked and unbanked Americans need financial services at a reasonable rate, McWatters added.
If confirmed, McWatters would replace board member Michael Fryzel, whose term ended August 2, 2013. Fryzel will continue to serve until McWatters is confirmed.

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