NCUA CITES GROWING CU RISKS
DESPITE PROFITABLE FORECAST
ALEXANDRIA, Va.-NCUA told credit unions the industry is heading for one of its most profitable years ever but still faces major risk as CUs shift towards new activities.
In a new letter to credit unions, NCUA said recent lending trends reveal several areas of concern. Among them are the move to riskier loans as new auto loans continue their decline; the growth of unsecured loans and of non-federally insured private student loans.
NCUA noted that the industry's net income for the first three quarters of 2011 exceeded the net for all of 2010, even after the $2 billion NCUA charge for the corporate credit union assessment. "In order to ensure that the positive trends continue in 2012, NCUA plans to closely monitor and supervise emerging risks which are evident in several lending and investment trends," said the Latter to CUs, Supervisory Focus for 2012.
"Of particular concern: Growth in low-rate first mortgages continues to far exceed growth in overall loans," said NCUA. "Credit unions holding high concentrations of long-term fixed-rate loans will be subject to negative margins when interest rates rise and short-term funding costs exceed income from fixed-rate mortgages."
While delinquency and charge-off ratios stabilized through the third quarter, the percentage of loans with delinquencies greater than 12 months increased, indicating that charge-offs may spike in the near future, said NCUA.
Consequently, NCUA said its examiners will be focusing on credit unions with elevated levels of credit, interest rate, liquidity and concentration risks.
PRESIDENT NAMES CORDRAY
HEAD OF CFPB IN RECESS APPT.
WASHINGTON-President Obama bypassed intransigent Republican senators last week and named former Ohio Attorney General Richard Cordray as a recess appointee-during the ongoing New Year's congressional recess-to direct the Consumer Financial Protection Bureau, allowing the new agency to begin its work in earnest.
GOP senators had blocked the consumer appointment because they want a change in the new agency's structure to, among other things, include a five-person panel to head it instead of a single director.
The President accused Senate Republicans of blocking Cordray's confirmation because they want to weaken the Dodd-Frank financial regulatory law that created the agency. "When Congress refuses to act and as a result hurts our economy and puts people at risk, then I have an obligation as president to do what I can without them," Obama said in remarks at a high school in Shaker Heights, Ohio.
"Financial firms have armies of lobbyists in Washington looking out for their interests," Obama said. "You need someone looking out for you, fighting for you."
Obama nominated Cordray to be the bureau's first director in July, almost one year after enactment of the Dodd-Frank financial regulatory law created the agency, and Republicans blocked Cordray's confirmation by the Senate last month. Republican congressional leaders criticized Obama's decision and said it may threaten confirmation of other nominees.
The Republican opposition caused Elizabeth Warren, who developed the consumer agency, to leave the fledgling operation and return to Massachusetts, where she is now a candidate for Senate. The lack of a director has so far hamstrung the new agency, preventing it from passing new regulations and embarking on major initiatives.
MONTHLY DATA COLLECTION
FROM BIG SOUTHEAST CUS ENDS
ALEXANDRIA, Va.-NCUA said it won't extend the monthly collection of financial data from credit unions in its southeast region Three, which it began almost three years ago during the biggest natural person credit union failure ever, Eastern Financial Florida Credit Union.
An NCUA spokesman said the agency has decided against requesting an extension of the program-as it recently proposed-and instead will terminate the temporary measure.
Under the program, credit unions over $1 billion in assets in the southeast region submitted their financial data monthly, instead of quarterly, as do all federally insured CUs.
Eastern Financial was a venerable $2.4 billion Miami credit union that failed in 2009 amid the state's real estate bust, then was merged into Space Coast CU, located three hours north. An internal report conducted by NCUA shows the examiners in the state, where the credit union giant was chartered, and at NCUA were slow to grasp the seriousness of its financial problems, prompting the additional data request for the region's CUs.
CUNA BUILDS CAMPAIGN CASH
WASHINGTON-CUNA said last week it added another $160,000 to its campaign warchest last month, starting the election year with almost $800,000 in available political funding.
"We're well-positioned to enter the election year," said Trey Hawkins, campaign finance director for CUNA, which will provide more than $3 million in campaign funding to hundreds of congressional candidates this election cycle, making it one of the most active political committees on Capitol Hill.
CUNA will spend the bulk of its campaign funding on political action committee contributions to individual candidates, but is also expected to spend significant funds on independent expenditures on behalf of favored candidates as election day approaches.
Through the first year of the two-year election cycle, CUNA raided more than $1.8 million and spent about $1.3 million on election activity, according to Hawkins.
