ARLINGTON, Va. -- Credit union employees who want to learn about the latest rules for performing due diligence and monitoring third-party outsourcing can attend NAFCU's Aug. 6 Webcast on the subject.

Consultant and former credit union executive David A. Reed will discuss the latest regulatory guidance on the topic and offer practical advice on managing third-party relationships. Reed, an expert on bankruptcy and collections, is the founder of CU Doctor, a full-service credit union consulting firm, and former vice president and general counsel for Apple Federal Credit Union in Fairfax, Va.

"For many credit unions, third-party vendors play an important role in facilitating smooth business operations and superior member service," said NAFCU Director of Regulatory Compliance Anthony Demangone, who will moderate the Webcast. "This Webcast will provide attendees with ways to maintain an effective vendor management program, which is essential for properly evaluating these vendor relationships and the risks they present."

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

Treasury Rules for Covered Bonds

WASHINGTON -- The Treasury Department is allowing financial institutions to set up a new mortgage-financing mechanism that it hopes will add capital that will prop up a depressed housing market.

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

They remain on the issuer's balance sheet, unlike mortgages that are currently sold on the secondary market to institutions like Fannie Mae and Freddie Mac.

"Covered bonds have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions by providing a new funding source that will diversify their portfolios," Treasury Secretary Henry Paulson said in a statement.

The department requires issuers to maintain an overcolleratalization value of at least 5% of the outstanding principal balance, have a specified investment, disclose information about the mortgage pools and test assets monthly to ensure the quality of the collateral.

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

NCUA said that while federal credit unions are allowed to issue covered bonds, it's doubtful that many will since most FCUs obtain adequate funds from member deposits and don't have much, if any, borrowings. When FCUs do borrow, they often turn to corporate credit 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 already subject to a range of consumer protections under federal law, the specific state regulations in Massachusetts don't apply to FCUs, NCUA Associate General Counsel Sheila Albin wrote in an advisory letter.

"NCUA regulations specifically address the accuracy of advertising and other representations, which is the primary focus of the state regulations," she wrote.

Albin also noted that the language of the Massachusetts consumer protection regulation specifically stated that they are not meant to override other laws or rules issued by "any regulatory board or officer acting under statutory authority of the commonwealth [of Massachusetts] or of the United States."

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

NCUA Liquidates Connecticut CU

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

In the second quarter of this year, the credit union's loan income fell 49.3% and its investment income dropped 46.9% while other income fell 100%. Its overall net income fell 132%. It had assets of $12.7 million

NCUA's asset management and assistance center will issue checks to individuals holding verified share accounts in the New London Security Federal Credit Union. Through the NCUSIF, credit union members' 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-ordered takeover by Mutual of Omaha Bank of three Western banks all part of a $3 billion Arizona holding company; the FDIC and Comptroller of the Currency oversaw the acquisition. The bank acquired 1st National Bank of Nevada, First National Holding Company of Scottsdale and First Heritage Bank of Newport Beach, Calif. The Scottsdale, Ariz., bank holding company ran into troubles, said regulators, over large losses in its alternative mortgage portfolio.

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

ALEXANDRIA, Va. -- CUNA, NAFCU and Navy Federal Credit Union are all supportive of NCUA's proposed regulations to give credit unions more incidental powers but are asking the agency to go even further.

The NCUA's proposed changes included allowing federal credit unions 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 financial institutions; and clarify that a federal credit union's negotiations and related activities with a vendor regarding group discounts for members and performance of administrative functions is a permitted finder activity.

NAFCU Senior Vice President of Government Affairs B. Dan Berger wrote the agency that the rules show that "NCUA is serving an important role in better enabling credit unions to best serve the needs of their fields of membership." But he urged the agency to streamline the application process for federal credit unions to seek permission to perform additional activities in related areas in which they have a "significant degree of expertise."

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

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

She suggested that the NCUA could list activities that federal credit unions could do in a particular state if state-chartered credit unions have the authority, even if those powers are not statutorily allowed for FCUs.

Dunn also urged NCUA to allow FCUs to accept accounts that allow prepayment for funeral expenses; to permit FCUs to manage the foreclosed property of other credit unions; and develop procedures for FCUs to manage the risk to use their authority to invest in foreign currency deposits.

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


Langley FCU Adds SBA Loans

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

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

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