ARLINGTON, Va. -- Credit union employees who want to learn aboutthe latest rules for performing due diligence and monitoringthird-party outsourcing can attend NAFCU's Aug. 6 Webcast on thesubject.

Consultant and former credit union executive David A. Reed willdiscuss the latest regulatory guidance on the topic and offerpractical advice on managing third-party relationships. Reed, anexpert on bankruptcy and collections, is the founder of CU Doctor,a full-service credit union consulting firm, and former vicepresident and general counsel for Apple Federal Credit Union inFairfax, Va.

"For many credit unions, third-party vendors play an importantrole in facilitating smooth business operations and superior memberservice," said NAFCU Director of Regulatory Compliance AnthonyDemangone, who will moderate the Webcast. "This Webcast willprovide attendees with ways to maintain an effective vendormanagement program, which is essential for properly evaluatingthese vendor relationships and the risks they present."

The Webcast will take place from 2 p.m. to 3:30 p.m. EDT. Thoseinterested in attending can visit www.nafcu.org/augustwebcast orcall 800-344-5580 to register.

Treasury Rules for Covered Bonds

WASHINGTON -- The Treasury Department is allowing financialinstitutions to set up a new mortgage-financing mechanism that ithopes will add capital that will prop up a depressed housingmarket.

Covered bonds are issued by financial institutions and securedby pools of assets such as mortgages.

They remain on the issuer's balance sheet, unlike mortgages thatare currently sold on the secondary market to institutions likeFannie Mae and Freddie Mac.

"Covered bonds have the potential to increase mortgagefinancing, improve underwriting standards, and strengthen U.S.financial institutions by providing a new funding source that willdiversify their portfolios," Treasury Secretary Henry Paulson saidin a statement.

The department requires issuers to maintain anovercolleratalization value of at least 5% of the outstandingprincipal balance, have a specified investment, discloseinformation about the mortgage pools and test assets monthly toensure the quality of the collateral.

Under FDIC regulations, covered bonds can account for a maximumof 4% of an issuer's liabilities.

NCUA said that while federal credit unions are allowed to issuecovered bonds, it's doubtful that many will since most FCUs obtainadequate funds from member deposits and don't have much, if any,borrowings. When FCUs do borrow, they often turn to corporatecredit unions or the Federal Home Loan Banks.

NCUA Says State Consumer Regs
On Mortgages Don't Apply to FCUs

ALEXANDRIA, Va. -- Because federal credit unions are alreadysubject to a range of consumer protections under federal law, thespecific state regulations in Massachusetts don't apply to FCUs,NCUA Associate General Counsel Sheila Albin wrote in an advisoryletter.

"NCUA regulations specifically address the accuracy ofadvertising and other representations, which is the primary focusof the state regulations," she wrote.

Albin also noted that the language of the Massachusetts consumerprotection regulation specifically stated that they are not meantto override other laws or rules issued by "any regulatory board orofficer acting under statutory authority of the commonwealth [ofMassachusetts] or of the United States."

She issued her opinion in response to an inquiry from GaryChandler of the RTN Federal Credit Union in Waltham, Mass.

NCUA Liquidates Connecticut CU

ALEXANDRIA, Va. -- The NCUA liquidated the 365-member New LondonSecurity Federal Credit Union of New London, Conn. last week.

In the second quarter of this year, the credit union's loanincome fell 49.3% and its investment income dropped 46.9% whileother income fell 100%. Its overall net income fell 132%. It hadassets of $12.7 million

NCUA's asset management and assistance center will issue checksto individuals holding verified share accounts in the New LondonSecurity Federal Credit Union. Through the NCUSIF, credit unionmembers' deposits are insured to at least $100,000 per account.

The credit union was chartered in 1936.

The NCUA's decision came three days after a regulatory-orderedtakeover by Mutual of Omaha Bank of three Western banks all part ofa $3 billion Arizona holding company; the FDIC and Comptroller ofthe Currency oversaw the acquisition. The bank acquired 1stNational Bank of Nevada, First National Holding Company ofScottsdale and First Heritage Bank of Newport Beach, Calif. TheScottsdale, Ariz., bank holding company ran into troubles, saidregulators, over large losses in its alternative mortgageportfolio.

CU Trades and Navy Federal Ask for
A Heaping Plate of Incidentals

ALEXANDRIA, Va. -- CUNA, NAFCU and Navy Federal Credit Union areall supportive of NCUA's proposed regulations to give credit unionsmore incidental powers but are asking the agency to go evenfurther.

The NCUA's proposed changes included allowing federal creditunions to provide correspondent services to foreign credit unions;add payroll services to activities allowed as operational programs;act as finders for financial products of other financialinstitutions; and clarify that a federal credit union'snegotiations and related activities with a vendor regarding groupdiscounts for members and performance of administrative functionsis a permitted finder activity.

NAFCU Senior Vice President of Government Affairs B. Dan Bergerwrote the agency that the rules show that "NCUA is serving animportant role in better enabling credit unions to best serve theneeds of their fields of membership." But he urged the agency tostreamline the application process for federal credit unions toseek permission to perform additional activities in related areasin which they have a "significant degree of expertise."

CUNA Deputy General Counsel and Senior Vice President MaryMitchell Dunn noted that the Comptroller of the Currency, whichregulates national banks, has a more expansive view of incidentalpowers than does NCUA. She said in her letter to the agency that"we do not believe there is any reason to conclude that Congresshas given NCUA less flexibility" to expand credit union powers.

Dunn wrote that credit unions don't want to use these incidentalpowers to build multiplexes that include hotels and condominiumsthe way some banks have, but would "engage in activities consistentwith their mission, purpose and the federal law."

She suggested that the NCUA could list activities that federalcredit unions could do in a particular state if state-charteredcredit unions have the authority, even if those powers are notstatutorily allowed for FCUs.

Dunn also urged NCUA to allow FCUs to accept accounts that allowprepayment for funeral expenses; to permit FCUs to manage theforeclosed property of other credit unions; and develop proceduresfor FCUs to manage the risk to use their authority to invest inforeign currency deposits.

Navy Federal President/CEO Cutler Dawson praised the proposalsas evidence of "NCUA's willingness to keep its regulations currentand provide consistency between agency legal opinions and federalcredit unions' express regulatory authority."


Langley FCU Adds SBA Loans

NEWPORT NEWS, Va. -- Langley Federal Credit Union has beefed up itsbusiness lending and services program with the addition of SmallBusiness Administration 7(a) and 504 loans.

"The ability to offer SBA loans opens new opportunities for thecredit union," said President/CEO Jean Yokum. "We recently assisteda local software developer expand his business using an SBA loan.It's great to be able to help our members with smallbusinesses."

The $1.2 billion credit union serves more than 162,000members.