Friday, May 25, 2018

CUs Accounted for 9.7 Percent of All Mortgage Originations in 2017

Credit unions accounted for about 9.7 percent of all mortgage originations in 2017, according to Home Mortgage Disclosure (HMDA) data. This is up from 9 percent in 2016.

In 2017, 1,706 credit unions were HMDA reporters.

Out of these 1,706 credit unions, 781 credit unions made fewer than 100 loans and 198 credit unions originated fewer than 25 loans.

Credit unions originated 237 thousand home-purchase loans in 2017 and 209 thousand refinance loans. A home-purchase loan or refinance loan is first lien mortgage for a one-to-four family, owner occupied, site-built homes.

Approximately 85 percent of home-purchase loans originated by credit unions were conventional mortgages, while almost 95 percent of refinance loans originated credit unions were conventional mortgages.

Credit unions are more likely than other lenders to hold mortgage loans they originated in portfolio. Credit unions sold about 44.9 percent of the home-purchase loans they originated and about 32.2 percent of the refinance loans they originated.

Credit unions reported that 4.3 percent of its conventional home-purchase mortgages were higher-priced loans, while 3 percent of its refinance loans were higher-priced loans.

Navy Federal Credit Union was the twelfth largest mortgage originator in 2017 and the only credit union to appear among the top 25 originators. Roughly 38 percent of the home purchase loans were conventional mortgages and approximately 23 percent of these conventional mortgages were higher-priced loans.

Read the report.

Thursday, May 24, 2018

More Problem CUs, But Fewer Assets and Deposits in Problem CUs as of March 2018

The number of problem credit unions edged higher during the first quarter of 2018, according to the National Credit Union Administration (NCUA).

At the end of the first quarter of 2018, there were 200 problem credit unions. In comparison, there were 196 problem credit unions at the end of 2017.

A problem credit union has a composite CAMEL rating of 4 or 5.

Total assets and shares (deposits) in problem credit unions fell during the first quarter. Assets in problem credit unions were $9.2 billion at the end of the first quarter of 2018 -- down from $9.6 billion at the end of 2017. Shares in problem credit unions decreased to 8.3 billion as of March 31, 2018 from $8.7 billion as of December 31, 2017.

NCUA reported that 90 percent of problem credit unions have less than $100 million in assets, while 1.5 percent have more than $500 million in assets.

At the end of the first quarter, 0.76 percent of total insured shares were in problem credit unions. At the end of 2017, 0.80 percent of total insured shares were in problem credit unions.

NCUA reported that reserves for the National Credit Union Share Insurance Fund (NCUSIF) increased from $925.5 million at the end of 2017 to $935.8 million at the end of the first quarter 2018.

Public Policy Groups Defend CU Tax Status

Thirteen public policy organizations wrote Senate Finance Committee Chairman Orrin Hatch (R -UT) defending the tax status of credit unions.

The group stated that lawmakers should "be wary of any proposal that penalizes the millions of Americans who have chosen to join credit unions."

The letter also noted the importance of credit unions to our troops.

The group wrote: "The two largest credit unions do have substantial assets, but they are essentially limited to serving the families of active-duty military and veterans and some civilian defense employees."

The group concluded that the goal of free-market tax reform is to reduce or eliminate double-taxation and the committee should discard any proposal that would double tax certain types of financial institutions and their customers.

Read the letter.

Wednesday, May 23, 2018

House Passes Reg Relief Bill for Banks and CUs

The House of Representatives by a bipartisan 258 to 159 vote passed S. 2155, Economic Growth, Regulatory Relief and Consumer Protection Act.

The legislation provides much needed regulatory relief for both banks and credit unions.

The legislation passed the Senate in March.

President Trump is expected to sign the bill into law.

Click here to see how your member of the House of Representatives voted.

Read the bill.

Monday, May 21, 2018

Federal Preemption Extended to FISCUs over Use of Term Bank

The National Credit Union Administration (NCUA) recently expanded the federal preemption to federally-insured state chartered credit unions (FISCUs).

In a May 11 legal opinion letter, NCUA stated that the Federal Credit Union Act (FCUA) and the agency’s advertising regulation preempted two Wisconsin Statutes, which barred state chartered credit unions from using the terms “bank” or “banking” in any form (with limited exceptions).

NCUA wrote that Wisconsin Law conflicted with NCUA's advertising rule.

NCUA contended that "[p]rohibiting federally insured credit unions from using these terms inhibits their ability to compete and, thus, jeopardizes their safety and soundness."

NCUA further stated that this preemption would level the playing field between state chartered credit unions and federal credit unions, which are not burdened by such state laws.

Moreover, NCUA stated that it does not believe the use of the word bank or its derivative as a verb is a deceptive trade practice, despite the Wisconsin Department of Financial Institutions thinking otherwise.

The legal opinion letter, however, stated that a credit union cannot call itself a bank or banking organization.

This legal opinion will allow credit unions in other states to push back on state laws that restrict the use of the term bank or banking in their advertising.

I wonder how the National Association of State Credit Union Supervisors and the states will react to this encroachment by NCUA onto their turf.

Read the letter.

Saturday, May 19, 2018

Financial Trades Support Harmonizing Reg J and Reg CC

Four financial trade groups earlier this week wrote supporting a Federal Reserve proposal to harmonize Regulation J -- which governs the collection of checks or other items by Federal Reserve banks and funds transfers through Fedwire -- with Regulation CC, which implements the Expedited Funds Availability Act.

The proposal would realign Reg J with recent amendments to Reg CC, which updated the check collection framework to reflect a system that is now largely electronic. It would also clarify that financial messaging standards for Fedwire transfers do not confer or connote legal status or responsibilities with respect to Fedwire funds transfers.

The groups noted that the Fed’s proposal “will help to improve consistency between, and reduce unnecessary duplication within, the two regulations.” However, they urged the Fed to further clarify Reg J to ensure that Federal Reserve banks make the Reg CC electronic check warranties to the same recipients (including the drawer and owner of the check).

The four trade associations that signed the letter are the American Bankers Association, The Clearing House, the Credit Union National Association, and the National Association of Federally-Insured Credit Unions.

Read the letter.

Friday, May 18, 2018

Bay Ridge FCU Is Undercapitalized

Problem taxi medallion loans caused Bay Ridge Federal Credit Union (Brooklyn, NY) to post a loss for the first quarter of 2018 and to become undercapitalized.

After reporting a loss of $4.3 million for 2017, Bay Ridge FCU posted a loss of almost $2.4 million for the first quarter of 2018. The loss arose from a provision for loan and lease losses of $3.1 million during the first quarter -- this was up from $500,000 from a year ago.

Over the last year, the credit union's net worth fell by 35 percent to $12.3 million. As of March 2018, the credit union's net worth ratio was 6.55 percent; however, its risk based net worth requirement was 7.45 percent. As a result, the credit union was classified as undercapitalized.

The $188 million credit union reported holding $69.6 million in commercial loans not secured by real estate, as of March 2018. At least some of these loans were to finance taxi medallions.

Delinquent loans at the credit fell by almost 50 percent during the first quarter of 2018 to almost $3.9 million. However, early delinquencies (30 to 59 days past due) rose by 61 percent to $13.8 million.

Delinquent commercial loans not secured by real estate fell 71.6 percent to $1 million during the first quarter of 2018. But early delinquencies increased by 74 percent to almost $12 million.

Net charge-offs were nearly $2.1 million at the end of the first quarter. In comparison, a year ago net charge-offs were $104,259.

Troubled debt restructured (TDR) commercial loans not secured by real estate were $19.3 million at the end of March 2018. Almost $893 thousand of these TDR loans were 60 days or more past due; but approximately $5.9 million in these TDR commercial loans were 30 to 59 days past due.

The credit union's allowance for loan and lease losses increased by just over $1 million during the quarter to $7.5 million as of March 31, 2018. The increase in allowance for loan and lease losses coupled by a decline in delinquent loans caused its coverage ratio (allowance for loan and lease losses divided delinquent loans) to more than double during the quarter to 193.09 percent.


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