CURRENT Newsletter | 26 January 2021 - Virginia Credit Union League

Your League supports HB1964 (Del. Lamont Bagby), believing the State Corporation Commission should have more flexibility in working with troubled credit unions prior to insolvency. The bill has passed the House and has been referred to the Senate Commerce and Labor Committee.
Your League has worked to amend HB2175 (Del. Luke Torian) to protect creditors’ interest with respect to judgment liens. The bill is slated to be heard by the General Laws committee tomorrow.
Your League has worked with a large group of stakeholders on companion bills HB2307 (Del. Cliff Hayes)/SB1392 (Sen. Dave Marsden) to draft a data privacy bill for consumer protection. Credit unions are exempted owing to our compliance with the Gramm Leach Bliley Act, but laws that touch on consumer data protection are obviously of keen interest to credit unions. We continue to monitor this bill and offer our perspective to lawmakers. The House bill has passed the Communications, Technology, and Innovation Committee on a 13-to-8 vote. The Senate’s General Laws & Technology Committee is still considering the measure.

The list above is only a partial list of bills we are currently tracking. There are a number of bills of interest that affect employers in general, including COVID-related paid leave, wages paid to essential workers, and COVID immunization.

We’ll keep you posted on any new developments.

Three-Part Fundamentals of the Mortgage Process Webinar Series Offered in February

A three-part webinar series, presented by CUNA Mutual Group partner MGIC, will provide credit union staff a better understanding of the mortgage cycle and process. Participants will learn how mortgage insurance works, the importance of a well-taken loan application, how to use the "Four Cs" in lending decisions, and the "whys" behind the "how-tos" of the mortgage process. A thorough understanding of the mortgage process will enhance your value to your members and help ensure an efficient, effective member service experience.

Fundamentals of the Mortgage Process Webinar Series schedule & content:

Wednesday, Feb. 3, 2 p.m.- 3 p.m.: Understanding the Mortgage Cycle and How Mortgage Insurance Works - In the first of our 3-part Fundamentals series, learn about the mortgage cycle, key players, regulatory compliance, mortgage insurance and MI premium plan options.
Wednesday, Feb. 10, 2 p.m.- 3 p.m.: Taking the Loan Application and Processing the Loan - In the second of our 3-part Fundamentals series, learn about loan types and programs, questions to ask while completing the loan application, the importance of processing and complete documentation.
Wednesday, Feb. 17, 2 p.m.- 3 p.m.: Evaluating Credit, Capacity, Capital & Collateral - In the third of our 3-part Fundamentals series, learn about evaluating the Four Cs—credit, capacity, capital and collateral —along with risk layering.

Your educational investment is $150 per person for all three sessions. MGIC clients may attend at no charge. The webinar and registration are hosted by our TRGroup partner, the Mississippi Credit Union Association.

Get additional program details or register here!

CUNA Webinar Covers Changes for New, Existing PPP Loans

Not only has lending for Paycheck Protection Program (PPP) loans been reauthorized through March 31, but certain PPP requirements have been revised. Credit union compliance staff will learn about the changes during a January 27 webinar, “PPP Reboot: What New and Existing Borrowers Need to Know About the New Stimulus Package.”

Free to CUNA members, the webinar will take place from 11 a.m. to 12:30 p.m. (ET). Attorney Christopher Pippett, a partner with Fox Rothschild LLP, will highlight various provisions of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (signed into law December 27) that expand the permitted and potentially forgivable uses of PPP loan proceeds.

To register for the webinar, visit cuna.org/shop.

Learn more

Share Your Story of How You've Helped Members During Pandemic

During one of the recent CUNA-League Small Credit Union webinars, we worked on how to tell your credit union’s story in simple but powerful ways. We’d like you to put that story to important practice this week. We’re asking credit unions to submit simple stories about how they’re helping members during these challenging times via our Advancing Communities advocacy initiative.

Advocacy is what we do as an organization; same for CUNA and our fellow Leagues. And we know that if we can help credit unions share stories with lawmakers, especially as new members of Congress and state legislatures are sworn in, we can preserve the tax status and strengthen the operating environment for the movement.

So, we're asking you to share your story, because people connect with real stories about real people. Simply click on the "share your story link" on the top-right corner of our Advancing Communities homepage and record a brief message that spotlights your credit union's good work on behalf of your members!

CUNA Compliance Releases 2020 Year-in-Review Resources

CUNA compliance staff has compiled and released its annual Year in Review and Year in Review Checklist, documenting 2020 in compliance, including 39 new rules and amendments issued directly in response to the pandemic. In addition to the 2020 review and corresponding checklist, our compliance staff has created a comprehensive list of COVID-19 temporary provisions that are in effect.

IGNITE 2021: Please Note Date Change!

We’re excited to announce the return of IGNITE, the League Annual Meeting! Now slated for Nov. 10-12, 2021 in Virginia Beach, we’ve secured the new Marriott Virginia Beach Oceanfront as our host hotel.

Registration and hotel information for the event will be distributed in the coming weeks, so stay tuned!

Pandemic Response

Black-Owned Businesses Hope This Round of PPP Won’t Fail Them

Black-owned businesses hope the latest round of the Paycheck Protection Program “won’t fail them,” and many are going to community development financial institutions (CDFIs) to apply for the loans, CNBC reports.

“CDFIs have long played a role in underserved communities. They are credit unions, banks, micro-loan funds, or venture capital providers that provide low-income communities access to financial services. CDFIs are also among those given early access to the latest round of PPP loans. When the program reopened on Jan. 11, community financial institutions that work with underserved communities were first in line.”

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Advocacy / Governmental Affairs

Yellen Confirmed by Senate to Lead Treasury Department

Janet Yellen was confirmed by the Senate Monday to serve as Treasury Secretary under President Joe Biden. Yellen previously served as chair of the Federal Reserve from 2014 to 2018.

“Congratulations to Secretary Yellen and thanks to the Senate for moving quickly to confirm her, as continuity at the Treasury is extremely important at this time,” said CUNA President/CEO Jim Nussle. “CUNA, Leagues, and credit unions look forward to engaging with Secretary Yellen on vital economic recovery initiatives, including the Paycheck Protection Program.”

Prior to chairing the Federal Reserve Board, Yellen was a member of the board from 2010 to 2014 (serving as vice-chair), and from 1994 to 1997.

Compliance / Regulatory Affairs

With Democrats in Power, Will CRA Be Expanded to Nonbanks?

The election of President Biden and turnover in leadership of the federal banking agencies not only means a new regulatory approach to implementing the Community Reinvestment Act. It could shine a brighter light on Congress potentially expanding the law to nonbanks (including credit unions).

A legislative effort led by Democrats to subject fintechs and other unregulated institutions that offer banking services to CRA exams would be an uphill battle, and some observers say lawmakers are not likely to focus on such a proposal anytime soon.

Yet Biden supported a CRA expansion during the presidential campaign to cover nonbank mortgage providers and insurance companies. A policy brief released by his campaign last February said the CRA currently "does little to ensure that ‘fintechs’ and non-bank lenders are providing responsible access to all members of the community.”

Both times the law has been meaningfully reformed — first in the 1990s and most recently under the Trump administration — calls followed to expand the law’s obligations to nonbanks, including credit unions, mortgage lenders and most recently, fintechs.

However, with everything else on the policy agenda — including fighting the brutal economic effects of the pandemic — some aren't holding their breath that a legislative overhaul of the CRA will happen anytime soon.

“I don’t think, realistically, that it will happen in the next couple of years,” said Van Tol. (American Banker, Jan. 22)

News About Credit Unions

Credit Union Mortgage Prospects Rise for 2021

Mortgages have had the largest increase in delinquencies in the pandemic recession, but analysts said they believe most borrowers have been in better shape than expected because of federal relief and loan accommodations.

With Biden in office and all three branches under Democratic control, the prospects for greater relief have risen, which in turn will allow more borrowers to stay current on their payments.

Gavin Harding, a senior business consultant for Experian, said Wednesday that many households that depend on jobs in restaurants and other hospitality sectors are still suffering in the pandemic recession, but many more are faring well.

Among households requesting forbearances, Gavin said significant numbers have not used them, “indicating they have more cash reserves than previously expected and they are not in as dire straits as we would have anticipated.”

On Friday, the prospects for mortgages brightened as the National Association of Realtors reported 5.53 million existing homes were sold in December, up 22.2% from a year ago.

“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” Lawrence Yun, NAR’s chief economist, said. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”

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CU Loan Growth During November An Anemic 0.05%

Credit union loans outstanding grew 0.05% in November, compared to a 0.11% increase in October and a 1.54% increase in November of 2019, according to CUNA’s Monthly Credit Union Estimates.

“November is often a strong month for credit union loan growth, as members increase spending during the holiday season,” said CUNA Senior Economist Jordan van Rijn. “However, this year was different as the pandemic depressed travel and spending, and many consumers used savings instead of credit for their holiday shopping.”

Other mortgage loans led loan growth during the month, rising 0.92%, followed by fixed-rate mortgages (0.88%), and credit card loans (0.85%). On the decline during the month were used auto loans (-0.04%), new auto loans (-0.17%), adjustable-rate mortgages (-0.84%), unsecured personal loans (-0.91%), and home equity loans (-2.09%), according to the CUNA analysis.

Credit union savings balances increased 0.20% in November, compared to a 1.83% increase in October and a 1.54% increase in November of 2019. Money market accounts led savings growth during the month, rising 1.96%, followed by regular share (0.65%), CUNA reported. On the decline during November were certificates of deposit (CDs) (-0.31%), individual retirement accounts (-1.59%), and share drafts (-1.90%).

“The draw-down in savings is not too surprising,” according to van Rijn. “The recession and government stimulus led many people to increase savings, but it’s natural that they would use those deposits during the holiday season. Nonetheless, we expect credit union savings growth to pick up again in December and January as the next round of stimulus payments come through.”

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NCUA Opens Streamlined CDFI Application

Federally insured, low-income credit unions seeking Community Development Financial Institution certification can apply to use the National Credit Union Administration’s streamlined qualification process beginning Jan. 24.

CDFI certification makes credit unions eligible for CDFI Fund training and competitive award programs that enhance their capacity to provide underserved communities with access to insured, affordable financial services. The Consolidated Appropriations Act, 2021 authorizes additional COVID-19 relief funding for community development financial institutions that predominantly serve minority communities.

Approximately a third of this additional funding includes a set aside for smaller financial institutions with less than $2 billion in assets.

Learn more

Community Banks Offer Better Deal on Overdrafts Than Small CUs: Moebs

A new Moebs $ervices survey demonstrated recent changes in the landscape of overdraft fees in the U.S., including average fee amounts by financial institution type and size, and the key role location plays in average fee amounts.

According to the survey of 3,126 banks, credit unions and savings banks conducted by the Lake Forest, Ill.-based financial institution research firm in November 2020, community banks with less than $100 million in assets charged an average overdraft fee of $26.26 – $2.14 or 8.1% lower than the $28.40 charged by credit unions with less than $100 million in assets. The survey included all depositories with more than $500 million in assets and a statistical example of depositories with less than $500 million in assets.

The results were more consumer-friendly for large credit unions, however. The largest credit unions surveyed, those with over $10 billion in assets, maintained a low average overdraft price of $26.18 – $8.15 or 31% lower than the average price of $34.33 set by banks in the same asset category.

Altogether, banks and credit unions in the $10 billion-plus asset category charged an average overdraft fee of $33.19. That’s the highest ever recorded in Moebs studies going back to 1986 and Federal Reserve studies that began in the late 1950s, according to Moebs $ervices CEO and Chief Economist Michael Moebs. “This is a huge contrast in many decades for the overdraft business,” he said.

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Financial Services / Economy

US Economic Activity Accelerated in December, Chicago Fed Data Shows

Growth in U.S. economic activity accelerated in December 2020 following improvements in production-related indicators, the Federal Reserve Bank of Chicago reported.

The Chicago Fed National Activity Index rose to 0.52 in December from a revised reading of 0.31 in November. The index is a weighted average of 85 economic activity growth indicators, with positive and negative index readings tied to above- and below-average growth, respectively.

Out of 85 indicators, 45 improved month-over-month in December, while 40 indicators declined. Seven of the 40 indicators that improved made negative contributions.

Production-related indicators made a positive contribution of 0.44 to the index, up from a positive contribution of 0.13 in November. Employment-related indicators contributed 0.13, compared with 0.15 in the prior month.

The contribution of the personal consumption and housing category fell to negative 0.09 in December from positive negative 0.06 in November. The weak consumption indicators pulled down the category's overall contribution in December. (S&P Global Market Intelligence, Jan. 25)

Hardship Accommodations Falling at Slower Rate, New Data Shows

Renewed federal assistance to consumers has reduced the chances that many loans now in accommodation will become delinquent or charged-off later on, a TransUnion executive said.

A report released Tuesday by the Chicago credit reporting agency found the percentage of accounts in some form of forbearance or other hardship accommodation was 2.87% as of Dec. 31, down from a peak of 2.87% on May 30. However, the pace of decline has been slowing.

Jason Laky, EVP and head of TransUnion’s financial services business, said those accounts are not counted in delinquencies or charge offs, and lenders are hoping few will join them down the road.

“The expectation among lenders and consumers is that this is a temporary hardship created by the impact of Covid. At the end, the consumer will be a good position to make their payments again,” he said.

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Risk Management

Don’t Let Data Walk Out the Door

An often-overlooked avenue for losing data is when a credit union doesn’t properly sanitize IT equipment before repurposing, recycling, or retiring it. During CUNA Mutual Group’s risk consultations, it is somewhat common that credit unions share they do not have a formal written policy/procedure in place or know if one is consistently followed for sanitizing and destroying equipment at the end of its useful life. This can open the door for data to be inappropriately accessed.

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