Credit Union Times recently asked the attorneys on theCredit Union Team at Kaufman & Canoles for their predictionsfor the top 10 major legal challenges for credit unions in2013.

Since Kaufman & Canoles believes that legal fees for creditunions need to be better managed, controlled and hopefully evenreduced, we have elected to highlight only seven predictions,rather than 10. They are as follows:

1. Mergers. Andy Keeney predicts that therewill be as many as 200 “friendly” mergers in 2013. The NCUAreportedly has “pre-selected” merger partners or merger candidates.They are pushing some healthy credit unions to merge.Unfortunately, there is little published legal guidance on mergers.The NCUA recently conducted a 1 1/2 hour webinar on how to do amerger. In 2013, the agency may “burden” credit unions who want tomerge with potential time delays and regulatory objections. Wepredict that the regulatory issues and legal issues will beovercome and mergers of credit unions will continue toincrease.

2. Legal Opinions. Ran Randolph predicts thatlegal opinions will return as a customary part of member businessloans in 2013. Before the recession, some credit unions decided toforego requiring borrower's counsel to render legal opinions ontransaction fundamentals such as good standing and enforceabilityof loan documents. However, because of recent problems in MBLs,more and more credit unions likely will insist upon legal opinionsto gain the comfort factor on those issues a legal opinion canprovide.

3. Loan Participations. Dustin DeVore predictsthat loan participations will increase in importance in 2013.Credit unions will continue to attempt to increase their loanportfolios. The NCUA has stated that in evaluating loanparticipations the same principles of evaluation and analysis applyas when the credit union is considering a third-party loan. Theseprinciples include underwriting, interest rate risk, and otherfactors. Some reported delinquencies have occurred inparticipations, therefore we predict that loan participations willdefinitely be on NCUA's watch list in 2013.

4. Confessed Judgments. Erin Deal predicts thatthe use of confessed judgments will continue to increase given therecent economic environment. A confessed judgment is where theborrower to an MBL agrees upfront to a judgment if there is adefault in the loan. It is a state-by-state issue, but we predictthat credit unions and the NCUA will encourage the drafting ofdocuments, especially when amending loans, to ensure that ajudgment is enforceable and a confessed judgment may become astandard requirement.

5. Class Action Litigation. Marc Darnellpredicts that the current trend of consumer-related class actionlitigation will increase in 2013 as credit unions increase theirloan portfolios with competitive interest rates, as credit becomesmore available in general, and as real estate and vehicle salescontinue to improve. Specifically, Marc predicts that TILA, RESPA,FCRA, and state-specific consumer protection act litigation willincrease, and the plaintiffs' bar will try to find common issues offact and law upon which to premise class action allegations.

6. Litigation With Military Personnel. BrianDolan predicts that recent successes in Department of Justicelawsuits against mortgage servicers for violating theServicemembers Civil Relief Act will encourage service membersthreatened with foreclosure, or charged interest above 6% forpre-service debt, to file complaints with the DOJ. As a result,expect additional federal lawsuits against servicers, as well aslenders, including credit unions. We also expect to see a rise inthe number of SCRA lawsuits filed by individual service membersagainst their lenders, including credit unions, demanding damagesplus all attorneys' fees and costs.

7. Mortgages. Meagan Thomasson predicts thatnew mortgage regulations will present the greatest legal andcompliance challenge for credit unions in 2013. Thousands ofdollars in training, forms and even legal fees might be incurred bycredit unions who must address the multitude of regulationsrelating to mortgage lending and servicing. Some new rules willtake effect in early 2013. With pages numbering in the thousands,credit unions will need to understand the implications of theseregulatory changes, and prepare to strengthen their complianceprograms. We expect mortgage regulations to be the number one hotchallenge for credit unions in 2013.

Andy Keeney is afrequent contributor to Credit Union Times and has morethan 35 years of experience as a credit union attorney. He isco-chair of the Kaufman & Canoles Credit Union Team in Norfolk,Va.