CURRENT Newsletter | 11 June 2020
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Headline News
- League to Host Small CU Virtual Meeting June 18
- Pandemic Resources Online
- Best Practices for a Compliant Collections Program Webinar
- CUNA Mutual Group Offering Free Online Education Forum June 25
- FREE Webinar: Closing the Interchange Gap Post-COVID-19
- Fiserv Hosting Forum 2020 as Virtual Meeting June 16-17
Advocacy / Governmental Affairs
Compliance / Regulatory Affairs
- FHA’s New Indemnification Requirements Should Be Revised
- CFPB Issues Updated TRID Factsheet and FAQs
- Reminder: NCUA MDI Mentoring Grant Application Deadline is June 30
Financial Services / Marketplace News
- April MCUEs Show COVID-19 Impact on Savings, Loan Demand
- Are CUs About to See Surge in Personal Loans?
- As Auto Loan Delinquency Rates Drop in Q1, a Warning for Credit Unions
- CFPB Introduces Elder Financial Fraud Prevention Resources
- Dow Plummets as Investors Grow Fearful About Economy
Security / Fraud Prevention
Headline News
League to Host Small CU Virtual Meeting June 18
Your League has scheduled a June 18 (10 a.m.) virtual meeting for credit unions with less than $100 million in assets. We'll cover pandemic, member service and lending issues.
Pandemic Resources Online
A reminder that your League continues to update pandemic-related resources on our website.
Best Practices for a Compliant Collections Program Webinar
You've verified the member, properly determined their credit eligibility and confirmed the ability to repay. However, when the ability to repay turns into a collection effort, you may find out you're not as ready as you thought. Join CUNA Mutual Group June 17 to learn how to build collection strategies around your members while staying compliant.
CUNA Mutual Group Offering Free Online Education Forum June 25
CUNA Mutual Group is offering the Moving Forward Forum, a free webinar on June 25. The Forum will feature three, 45-minute online sessions:
How Leveraging Agility Will Help You Meet Uncertainty Head-On
Leading is more complex than ever. We will share some of the strategies that are helping us lean into this uncertainty with confidence!
Maximize Credit Unions’ Non-Interest Income
Today’s unprecedented economic conditions will greatly impact credit unions’ Key Performance Indicators (KPIs), and, in particular, credit union earnings. In order to be there for your members and to keep regulators satisfied, credit unions must explore every aspect of their income statement to leverage additional income. Learn strategies to sustain and improve your Non-Interest Income revenue stream and explore industry best practices to help with your strategy.
Multicultural Consumers—The Good, The Bad and The Opportunity
Recent events have amplified differences in income, healthcare access and discrimination toward people of color that had been less visible to the general population, and this is presenting new challenges that will require novel solutions. Is your credit union ready to connect with this market?
FREE Webinar: Closing the Interchange Gap Post-COVID-19
As the new normal continues to evolve it is important to be flexible in how your payment strategies may change as well. Please join Fiserv and your League on June 23 for a FREE webinar looking at ATM, Debit and Financial strategies designed to close the interchange gap post-COVID-19.
Fiserv Hosting Forum 2020 as Virtual Meeting June 16-17
Fiserv has reimagined its Forum 2020 as a two-day virtual experience designed to help Fiserv clients navigate this unprecedented time of accelerated change.
Join us June 16–17 for perspectives on the changes in our world today, including keynotes from Dr. Janet Yellen (past chair of the Federal Reserve System’s Board of Governors), Michael Dell (Dell Computers) and Gen. Stan McChrystal (former commander of U.S. and international forces in Afghanistan).
Advocacy / Governmental Affairs
ABA Seeks Supreme Court Intervention in Field-of-Membership Case
The American Bankers Association (ABA) on June 8 filed its reply brief urging the U.S. Supreme Court to review a lower court ruling in the association’s challenge of the National Credit Union Administration’s 2016 field-of-membership rule. (Keith Leggett’s Credit Union Watch, June 11)
In August, a three-judge panel of the D.C. Circuit Court of Appeals upheld much of rule while remanding a portion related to redlining concerns. The court will grant ABA’s petition if four of the nine justices vote to accept the case.
In appealing, ABA argued that the D.C. Circuit’s decision “stretches Chevron deference past the breaking point” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue.
Compliance / Regulatory Affairs
FHA’s New Indemnification Requirements Should Be Revised
A recent Federal Housing Administration (FHA) policy will hamper access to FHA-insured loans during the COVID-19 crisis, CUNA and more than a dozen organizations wrote to Department of Housing and Urban Development leadership this week.
The FHA recently announced a policy requiring lenders to provide 20% indemnification (of the original loan amount) for up to two years in relation to borrowers that enter forbearance due to pandemic-related hardship after closing and prior to the FHA insuring the loan
“While we understand FHA’s desire to limit risk and exposure during uncertain times, we believe the resulting burden on the lender will have the effect of severely limiting access to FHA-insured loans for homebuyers,” the letter reads. “In the interest of maintaining a well-functioning housing market during this crisis, we urge FHA to revise Mortgagee Letter (ML) 2020-16 and commit that it will insure all otherwise-eligible loans that enter into forbearance shortly after closing without any indemnification requirements or other restrictions.”
CFPB Issues Updated TRID Factsheet and FAQs
The Consumer Financial Protection Bureau (CFPB) published guidance related to the TILA-RESPA Integrated Disclosure (TRID) Rule.
Reminder: NCUA MDI Mentoring Grant Application Deadline is June 30
The National Credit Union Administration (NCUA) issued a reminder that small, low-income credit unions certified as minority depository institutions have until June 30 to apply for MDI mentoring grants from the National Credit Union Administration. Credit unions should submit questions to NCUA staff by email to cureapps@ncua.gov.
Financial Services / Marketplace News
April MCUEs Show COVID-19 Impact on Savings, Loan Demand
CUNA’s April Monthly Credit Union Estimates (MCUEs) provides a first comprehensive look at impacts the COVID-19 crisis is having on U.S. credit unions. While the effects are significant, they are in line with CUNA economists’ expectations and credit unions remain well-positioned to continue to serve members in the downturn.
The MCUE report reflects credit union operating results for the first full month of the crisis (April). These include challenges wrought by immense fiscal and monetary policy responses.
The data shows massive growth in credit union savings balances – due mostly to a flood of government stimulus deposits which greatly magnified normal seasonal savings inflows, CUNA Chief Economist Mike Schenk notes.
Overall, credit union savings balances grew 4.7% in April, an astonishing 56% annualized pace and the largest one-month increase in the 30+ years that CUNA has collected MCUE data.
“The increases occurred against a backdrop of rising equity prices – which staged a 13% rally during the month,” Schenk said.
Overall, savings balances increased 7.0% during the first four months of the year and 13.8% over the past 12 months.
Credit union members continued to keep savings short and liquid with share drafts and regular shares accounting for 93% of total savings growth in the month.
“While savings balances ballooned, anxiety related to the fast-spreading pandemic and a shocking wave of over 30 million job losses had most members hunkered down,” Schenk said. “Beyond stockpiling necessities, consumers were generally reluctant to spend or borrow: Overall, credit union loan balances were up only 0.1% in the month (an annualized pace of just 1.2%).”
Loans increased 1.0% during the first four months of the year and 6.8% over the year ending April 2020.
Loan balances declined across all but two portfolio segments in April:
- Low market interest rates continued to fuel mortgage re-financings and fixed-rate mortgages increased 1.2% in the month (a 14.2% annualized pace);
- In addition, the SBA’s $349 billion Paycheck Protection Program (PPP) rolled out April 3 and credit unions stepped in to help small businesses across the nation - reflected in the fact that commercial loans increased an astonishing 5.2% in the month (a 62% annualized pace).
“Fast savings growth and weak loan growth pushed the credit union movement’s loan-to-share ratio down from 84.4% at the start of the year to a three-year low of 78.1%,” Schenk said. “No four-month period in MCUE’s 30-year history reflects a decline as severe as this 6.3 percentage point slide. Of course, declining loan-to-share ratios are typically associated with falling net interest margins and more challenging bottom-line results.”
Dollar delinquency as a percent of loans increased modestly – from 0.59% in April 2019 to 0.69% in April 2020. However, total dollar delinquencies increased by 10% in April and by 23% compared to year-ago levels.
Fast asset growth and more obvious earnings pressures combined to push the aggregate credit union capital-to-asset ratio down from 11.2% at the start of the year to 10.7% at the end of April.
The 0.5% decline is the most severe since the Great Recession, but overall capitalization levels are substantially higher than the 7.0% level seen as “well-capitalized” by credit union regulators,” Schenk said. “Credit unions remain well-positioned to continue to serve members in the downturn.”
Are CUs About to See Surge in Personal Loans?
In a mere two months, there have been more than 40 million unemployment claims in the U.S. At the onset of the pandemic, the Dow Jones had its steepest first-quarter drop in its 124-year history, while the S&P 500 had its sharpest decline since the 2008 financial crisis.
Financial services company LendEDU has been tracking how the coronavirus is impacting everyday Americans from a financial standpoint. From March 18 to May 5, LendEDU conducted three separate surveys of adult Americans and asked similar questions each time related to personal finances.
By the time of the third survey, coronavirus-related expenses for the average consumer had risen dramatically, from $335.65 on March 18 to $987.20 on May 5. But as expenses continue to climb, savings are moving in the other direction, and consumers are running out of ways to cover costs.
As a result, it is expected that there will be a surge in personal loan use to cover costs. Personal loans are typically unsecured loans that offer borrowers quick access to cash that can be used for essentially anything. They typically come with a fixed interest rate that can be quite low depending on the borrower’s financial situation. (Credit Union Journal, June 11)
As Auto Loan Delinquency Rates Drop in Q1, a Warning for Credit Unions
Delinquency rates on automotive loans declined in Q1 2020, according to Experian’s State of the Automotive Finance Market Report released this week.
Melinda Zabritski, Experian’s senior director of automotive financial solutions, called the rates “a positive sign for the industry” but warned that other factors could have influenced the downward trend.
“For example, COVID-19 wasn’t declared a national emergency until mid-March. Add to that, some consumers are likely leveraging financial resources and assistance programs, such as stimulus checks, to manage through financial hardship, so its true impact may not be evident until the months ahead,” Zabritskis said in a statement.
Both 30-day and 60-day delinquencies dropped compared to last year, with 30-day delinquencies seeing a more significant decrease from 1.98% in Q1 2019 to 1.93% in Q1 2020, according to the report. The research shows 60-day delinquencies are .67%, down from .68% the year before.
Credit unions comprised 19.5% of the automotive loan market in Q1 2020, down from 19.9% in Q1 2019.
CFPB Introduces Elder Financial Fraud Prevention Resources
Each year on June 15, the Consumer Financial Protection Bureau (CFPB) commemorates World Elder Abuse Awareness Day (WEAAD) by sharing resources to help prevent elder financial exploitation.
Dow Plummets as Investors Grow Fearful About Economy
The stocks mega-rally hit a roadblock: A somber economic outlook from the US Federal Reserve and the 2 millionth coronavirus case in the United States has investors questioning whether they had boosted the stock market too far, too fast.
The rising number of coronavirus cases in the United States has unnerved Wall Street. A second wave of infections could force many businesses to close again just after they reopened.
Federal Reserve Chairman Jerome Powell said Wednesday that the economic future was highly uncertain. Although he acknowledged that May's jobs report was a welcome surprise, he noted that many millions of Americans will never go back to their jobs and could remain unemployed for years.
- Related: Treasury Secretary Mnuchin says ‘we can’t shut down the economy again’
- Related: Dow plunges 1,000 points, heads for worst day since April as airlines and retailers drop
Security / Fraud Prevention
FBI Says Hackers Targeting Banking Mobile Apps
The FBI warned Wednesday that hackers are “targeting mobile banking apps in an attempt to steal money as more Americans have moved to online banking during the coronavirus pandemic,” according to The Hill. “The FBI specifically pointed to banking trojans as a threat, which involves a malicious virus hiding on a user’s mobile device until a legitimate banking app is downloaded. Fake banking apps were also cited as a threat, with users in danger of being tricked into downloading malicious apps that also steal sensitive banking information.”
Settlement Reached in Equifax Breach Lawsuit
A settlement has been reached in the Equifax data breach lawsuit, of which CUNA, Leagues and credit unions are plaintiffs. CUNA filed suit against Equifax in October 2017 after a data breach that exposed the personal information of more than 145 million consumers and 209,000 credit card numbers.
CUNA, along with certain other institutional plaintiffs, were recently allowed back as plaintiffs to join the institutions that issued compromised cards as plaintiffs.
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