NCUA NIXES TRADITION
OF NAMING DEBTORS'
ENDICOTT, N.Y.-NCUA HAS TOLD AT LEAST ONE CREDIT UNION TO CEASE USING A POPULAR METHOD OF ENCOURAGING SCOFFLAW BORROWERS TO PAY UP BY PUBLISHING THEIR NAMES IN NOTICES OR NEWSLETTERS CALLING FOR THEIR EXPULSION FROM THE CREDIT UNION IN A SPECIAL MEETING OF MEMBERS.
The publication of members who have caused the credit union a loss, though allowable under credit union regulations, violates the confidentiality provision of the Federal CU Bylaws implementing the privacy guidelines of the Gramm-Leach-Bliley Act, NCUA told Visions FCU.
"Generally, an FCU may not disclose any personal information about a consumer to a non-affiliated third party unless four conditions are met," Mark Treichel, director of the NCUA's northeast Region One, told Visions in a June letter. Those conditions are: the consumer must be provided a privacy notice; the notice must contain an opt-out provision; the consumer must be given a reasonable opportunity to opt-out and the consumer must not have opted out.
"Since (Visions) does not appear to have complied (with these conditions)," wrote Treichel, "its disclosure in its newsletter of the names of members who maintain a liability to the credit union represents a breach of the FCU Bylaws' confidentiality provision."
Frank Berrish, president of the $3-billion credit union, said the new NCUA stance will put a crimp in the credit union's long-time practice-one shared by hundreds of CUs-of publishing the names of members in its newsletter who will be voted for expulsion at a special meeting for causing a loss to the credit union. "We decided not to fight it," Berrish told Credit Union Journal, explaining that the practice has succeeded in encouraging scofflaw members to pay outstanding debts of as much as $25,000. Under the new policy, he said, Visions will notify the members of a special meeting for the purpose of expelling members who caused it a loss but will not name the individuals in the notice.
"This is a common practice," said Berrish. "We copied it from other credit unions. We've been doing it for 10 years and have probably expelled over 2,400 members."
The publication of individuals targeted for expulsion can be useful in several ways, he noted. One is to shame the member into paying up. Another is to encourage other members, some of whom may also be owed debts by the individual, to attend and participate in the vote. In some cases, the members have voted against the credit union's recommendation for expulsion, he said.
AGENCY ADDS FIVE PEOPLE
TO OVERSEE CORP PROGRAM
ALEXANDRIA, VA.-THE NCUA BOARD APPROVED THE HIRING OF FIVE ADDITIONAL PERSONNEL TO HELP MANAGE THE SERVICING AND MONITORING OF ITS CORPORATE CREDIT UNION RESOLUTION PROGRAM, WHICH THE CREDIT UNION REGULATOR SAYS WILL TAKE AT LEAST ANOTHER 10 YEARS TO COMPLETE.
As part of the expansion of the program, NCUA is also creating a Securities Management and Oversight Committee to oversee the $28.6-billion in NCUA Guaranteed Notes issued to the public to help finance the corporate program. The additional hires, estimated to cost $200,000 a year, are in addition to the three-and-a-half full-time existing NCUA staff that now oversee the corporate resolution.
NCUA, which approved a $2-billion assessment last week to help pay costs for the corporate program, estimates the Temporary Corporate CU Stabilization Fund, which is financing the program with a low-interest loan from the U.S. Treasury, will incur costs of $12.2 million in 2012. Those costs will be figured into next year's assessment.
The expanded program will manage the estates of the five corporate failures, which hold more than 2,800 bonds, as well as the NGNs. NCUA said long-term monitoring of the bonds is likely to be much longer than 10 years in order to conduct a re-securitization once the NGNs mature.
As part of the expanded program, NCUA plans to hire two analysts in the capital markets division of Examinations and Insurance, one investment program manager in its Asset Management and Assistance Center, which resolves credit union failures, and two program support officers for the new oversight committee.
NCUA has re-securitized almost $50 billion in toxic mortgage-backed securities once held by the five corporate failures: U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
NCUA OBJECTS TO $8.5B
B OF A MBS SETTLEMENT
NEW YORK-NCUA AND MORE THAN THREE DOZEN OTHER INVESTORS HAVE LODGED OBJECTIONS TO BANK OF AMERICA CORP'S $8.5 BILLION SETTLEMENT OF CLAIMS OVER LOSSES ON MORTGAGE-BACKED SECURITIES, JOINING A GROWING LIST OF INVESTORS AND REGULATORS THAT ARE CHALLENGING THE DEAL.
NCUA, which holds some $50 billion of toxic MBS once owned by five failed corporate credit unions, told a federal court it is intervening because it does not have enough information to evaluate the settlement.
NCUA joins several other regulatory entities left holding the bag on failed MBS that are objecting to the landmark settlement. Other MBS investors opposed to the deal include six different FHLBs, Goldman Sachs & Co. and Ambac Assurance.
The settlement surrounds MBS sold by Countrywide Financial, the mortgage giant that was acquired by Bank of America in 2009. Bank of New York Mellon Corp, the trustee handling the 530 trusts with $174 billion of unpaid principal balances, had negotiated the settlement with 22 institutional investors.
