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CURRENT Newsletter | 12 May 2020

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Headline News

Advocacy / Governmental Affairs

Compliance / Regulatory Affairs

Economy / Financial Services

Headline News

FREE League Webinar May 13: Updates on HR, Employment Law Issues

We are again partnering with the Woods Rogers law firm for a webinar detailing HR and employment law updates. The webinar will take place May 13 at 11 a.m.

Attorneys Dan Summerlin and Tom Winn will provide updates on state and federal issues, paying particular attention to the Virginia employment laws signed by Gov. Northam last month. What do these new laws mean for your credit union and when are they effective? They’ll also answer your questions.

REGISTER HERE

FREE May 19 Webinar: Managing Risk with Changing Business Practices

Join us May 19 as CUNA Mutual Group Senior Risk Consultant Carlos Molina walks us through today’s evolving threat profiles, brought on by the pandemic.

REGISTER HERE

He’ll discuss branch re-openings, branch reconfigurations, digital technology, crisis communication, frauds/scams, remote work arrangements and work flexibility.

Bottom line: Our business practices will change as we adjust to a new normal.

  • The way we operate our locations – whether member-facing branches or administrative offices – will change dramatically.
  • We’ll need to prepare for new challenges related to employee safety and security issues.
  • A whole host of new Human Resource Management issues will need to be addressed, including hiring, work-at-home policies and supervision. Carlos will also discuss development of consistent policies and consistent implementation of those policies.
  • Fraud and security issues will be an evolving issue, and we may be especially vulnerable with many employees continuing to work from home.
  • The lending environment will be a challenge during the next six months (at least). Are you also prepared to address possible liquidity issues, a continued uptick in forebearance requests and collections issues?
  • On the positive side, there may be new lending and payments opportunities, as well!

FREE League Virtual Call May 20: Managing Pandemic-Related Collections, Bankruptcy Matters

Join our virtual call May 20 with attorney Eddie Whitlock on collections, bankruptcy and court system issues related to the pandemic. The presentation will cover key issues such as foreclosures, repossessions, late payments, modifications and more. We’ll also cover the anticipated uptick in bankruptcies.

REGISTER HERE

You will receive an email with meeting the meeting link and instructions after registering.

Advocacy / Governmental Affairs

Policy Changes from NCUA, Congress Would Aid CU Member Service

Since the onset of the crisis, CUNA and the Leagues have been working closely with the National Credit Union Administration and Congress on additional policies to help credit unions.

Recommendation actions from the NCUA include:

  • Review its existing PCA regulations and offer forbearance to credit unions that may temporarily fall between the 6% and 7% net worth leverage ratio;
  • Further delay implementation of the risk-based capital rule to, at earliest, Jan. 1, 2023;
  • Understand and consider credit union’s good-faith efforts regarding Regulation B (Equal Credit Opportunity Act) notices for new credit products intended to assist members during the pandemic; and
  • Issue an interim final rule on Payday Alternative Loans (PALs) to ensure credit unions have the flexibility to meet members’ needs during the pandemic.

CUNA also provided a list of recommendations for Congressional policies, including:

  • Expand the borrowing ability of the Central Liquidity Facility to 25 times the paid in capital, extend the expanded borrowing authority until the end of 2021 and make permanent the ability of corporate credit unions to act as agents for credit unions;
  • Temporarily reduce the level at which credit unions are considered well capitalized from a net-worth ratio of 7% to 6% and adequately capitalized from 6% to 5% during the pandemic;
  • Exempt credit union business loans from the member business lending cap until one year after the end of the COVID-19 emergency declaration. A House bill has introduced to accomplish this, and a Senate bill has been announced.

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[RELATED: State Leagues Magnify Mainstay Value During Crisis]

House Democrats Unveil New $3 Trillion Coronavirus Relief Bill

House Democrats released their latest bill Tuesday designed to blunt the coronavirus pandemic’s devastating effects on the economy and health-care system.

Party leaders expect to vote on the more than 1,800-page package on Friday, along with a plan to allow proxy voting on legislation during the crisis. House Speaker Nancy Pelosi plans to discuss the emergency response package Tuesday afternoon.

If it passes the House, the Democratic-written plan will likely face roadblocks in the Senate. It is unclear when both Democrats and Republicans would sign off on a proposal for more relief, as the GOP downplays the need to spend more federal money on a rescue bill now.

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House, Senate Bills Would Exempt COVID-19 MBLs from Cap for One Year

Reps. Brad Sherman (D-Calif.) announced a bill Friday to exempt credit union business loans related to the pandemic from the member business lending cap for one year. Sens. Ron Wyden (D-Ore.) also announced he will introduce a Senate companion bill next week.

The House is expected to return to session as early as next week to continue work on the next phase of COVID-19 relief legislation, and CUNA and Leagues have called for such an MBL exemption to be included in the package.

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Compliance / Regulatory Affairs

NCUA, Fed Regulators Approved Policy Statement on CECL

The Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency Friday approved a policy statement on allowances for credit losses. The statement, which will be effective at the time of each institution’s adoption of the credit losses accounting standard, is intended to promote consistency in the interpretation and application of the Financial Accounting Standards Board’s credit losses accounting standard. The statement also introduces the current expected credit losses (CECL) methodology.

The interagency policy statement describes the measurement of expected credit losses using the CECL methodology and updates concepts and practices detailed in existing supervisory guidance that remain applicable. The agencies also finalized interagency guidance on credit risk review systems. The guidance presents principles for establishing a system of independent, ongoing credit risk review in accordance with safety and soundness standards.

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CFPB Expands Relief for FIs from Remittance Rules

More banks will be able to estimate costs to consumers of remittance transfers rather than quote exact third-party fees and exchange rates under a final rule issued by the Consumer Financial Protection Bureau.

The rule released Monday expanded and made permanent temporary protections established in an earlier 2013 regulation. The new rule establishes a safe harbor for banks providing 500 or fewer transfers a year from complying with a requirement that they disclose the price of a remittance transfer, the exact exchange rate, the amount to be delivered and the date funds are available.

Economy / Financial Services

Almost 4 Million Mortgages are in Forbearance, MBA Says

The share of all U.S. mortgages in forbearance rose to 7.91% during the week ended May 3, from 7.54% in the prior week, the Mortgage Bankers Association said in a Monday report.

While the pace of requests for deferred payments is slowing, the number of forbearance approvals likely will continue to increase, said Mike Fratantoni, MBA’s chief economist.

“It will not be surprising if the forbearance numbers continue to rise,” Fratantoni said. “The dreadful April jobs report showed a decline of more than 20 million jobs, and a spike in the unemployment rate to the highest level since the Great Depression.”

Savings Outgrow Loans Again, CUNA Report Says

In the context of the COVID-19 pandemic, credit union members are aiming for liquidity as savings growth once again outgrew loan growth in March, according to CUNA’s latest Monthly Credit Union Estimates.

The average loan-to-share ratio fell to 81.65% in March, versus February’s 82.12% average. Savings balances grew 0.89% while loan growth grew 0.32% in March.

Liquidity has been on the rise since last summer, according to CUNA, and it is a trend that is expected to continue. “We expect savings growth to continue to grow faster than loan growth for the rest of the year,” Samira Salem, CUNA senior policy analyst, said. “In fact, we expect April data to show a massive increase in deposits mostly due to stimulus checks and unemployment benefits.”

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Consumer Alert: Check Your Credit More Often Through COVID-19 Emergency

Virginians can check their TransUnion, Equifax, and Experian free credit reports on a weekly basis until April 2021. Normally, each report can only be accessed for free once per year.

After visiting AnnualCreditReport.com and entering the prompted information, you should take these steps to ensure the accuracy of their report:

  • Verify all business names and payment dates are correct in the report’s transaction history;
  • Verify all addresses, additional lines of credit, and accounts are correct;
  • Dispute any unfamiliar or incorrect information—the Office of Attorney General sent a letter to credit reporting agencies reminding them of their obligation to resolve these disputes quickly for Virginians.

Virginians can sign up for scam alerts, which offer tips for consumers to avoid becoming a victim of a scam, warn about new scams, or update subscribers on consumer protection issues.

Lenders Worry They Could be Stuck with Billions in PPP Loans

Some lenders are becoming increasingly concerned that they will end up holding billions of dollars of Paycheck Protection Program loans on their books.

Lenders have made roughly $520 billion in PPP loans since the program’s debut in early April. Under the coronavirus stimulus law that created the program, loans should be forgiven if borrowers use the funds to cover payroll and certain other expenses.

The Small Business Administration and Treasury Department, the agencies running the program, have yet to provide complete guidance on forgiveness as mandated by the law. One key yardstick in the program — a requirement that borrowers use 75% of the funds for payroll — wasn’t specified in the legislation.

Lenders are worried that many borrowers will fall short of the standards necessary for forgiveness, leaving them with two-year loans with nominal 1% interest rates — along with jaded and irate customers.

Banking trade associations are asking Congress to address several issues with the SBA:

  • Lower the 75% payroll expense requirement to no more than 50%
  • Create a PPP loan forgiveness calculator
  • Exempt loans of less than $1 million from detailed review
  • Provide guidance on the documentation needed for forgiveness
  • Detail how the SBA intends to issue payments to lenders

(American Banker, May 11)

 



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