NAFCU Compliance Blog

NCUA’s Stress Tests and Capital Planning Proposal; Programming Note

Written by Angela Meyster, Regulatory Affairs Counsel

At its October Board meeting, the NCUA released a proposed rule requiring annual stress testing for credit unions with more than $10 billion in assets (covered credit unions).  Additionally, the proposal would require such credit unions to submit, on an annual basis, capital plans with certain mandatory elements and analyses.  The increased need to implement a stress testing regime seems to stem from the NCUA wanting parity with other federal regulators, as its proposal largely mirrors the Federal Reserve System’s requirements that large bank holding companies submit to capital plans.

Under the proposal, the NCUA will conduct the stress testing on covered credit unions, financed by the share insurance fund and administered by a third party selected by the NCUA.  Each year of stress testing will use a baseline, adverse, and severely adverse scenario (described by the NCUA each December 1) on credit unions’ financial data as of September 30, using a nine-quarter horizon.  Although credit unions and the NCUA contest the potential burden of the stress testing component of the proposal, the capital plan component will almost certainly increase annual compliance costs.

A covered credit union must submit a capital plan, based on its financial data of the previous September 30, by March 31 of each year.  The capital plan must include:

• A quarterly assessment of the expected sources and levels of capital that reflects the credit union’s size, operations, and existing level of capital under both favorable and unfavorable conditions, including:
•  estimates of projected revenues, losses, and pro forma capital levels under a range of conditions appropriate for the credit union’s characteristics; and
• a detailed description of the credit union’s process for determining its capital adequacy;
• A discussion of how the credit union can maintain an appropriate level of capital given its risk profile, under both expected and unfavorable conditions;
• A discussion of how the credit union can, under both expected and unfavorable conditions, maintain its access to funding, meet its obligations to creditors and other counterparties, and serve its members;
• The credit union’s capital policy; and
• A discussion of any expected changes to the credit union’s business plan that are likely to have a material impact on its capital adequacy and liquidity.

Further, covered credit unions must conduct a variety of analyses as a part of their capital planning process.  Mandatory analyses a credit union must conduct include:

• A sensitivity analysis to evaluate the effects on capital of changes in variables, parameters, and inputs used in its capital plan;
• An analysis of the net economic value of the credit union using interest rate risk shocks of at least plus or minus 300 basis points, assuming all non-maturity shares have final maturities not exceeding two years; and
• An analysis of the credit risk to capital under unfavorable economic conditions, both on its own and in conjunction with the impact of unfavorable interest rate scenarios.

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Programming Note. NAFCU’s offices will close today at noon and remain closed until Monday, December 2, for the long holiday weekend. We’ll be back to blogging on Monday!

Have a great Thanksgiving! 

 

NCUA’s November 2013 Board Meeting and the Final CUSO Rule

Written by JiJi Bahhur, Director of Regulatory Compliance

During last week’s open board meeting, the National Credit Union Administration (NCUA) took several important actions, including unanimously approving the final Credit Union Service Organization (CUSO) rule.

Effective June 30, 2014, the final CUSO rule will require CUSOs to annually provide basic profile information to the NCUA and the appropriate state supervisory authority. CUSOs engaging in certain complex or high-risk activities, such as credit lending, information technology and custody and investment management, will be required to report more detailed information, including audited financial statements and general customer information.  The reporting burden is on the CUSO, not the credit union, but credit unions will need to update their written CUSO agreements to include the new requirements in the final rule.

From NCUA’s Board Action Bulletin:

“Other provisions of the new rule include:

• Extension, for consistency, of sections of the current CUSO rule, which currently apply only to federal credit unions, to all federally insured credit unions. A CUSO must agree to:

- Account for its transactions in accordance with generally accepted accounting principles;

- Prepare quarterly financial statements; and

- Obtain an annual financial statement audit by a licensed certified public accountant.

• A new requirement that CUSOs must agree to report information directly to NCUA and to the state regulator, as applicable. CUSOs that offer complex or high-risk services—like credit and lending; information technology; and custody, safekeeping and investment management services—must report more detailed information, including financial statements and general customer information.

 

• Any subsidiary in which a CUSO has an ownership interest in any amount will be subject to the rule if the subsidiary is primarily engaged in providing products or services to credit unions or their members.

 

• A requirement that a state-chartered credit union that is or would be rendered less than adequately capitalized by additional investment in a CUSO must obtain approval from its state regulator and notify an NCUA regional director prior to making the investment.”

CUSOs will begin submitting reports to NCUA under new section 712.3(d)(4) when NCUA’s reporting system becomes fully operational by December 31, 2015.

You can find the final CUSO rule here.  Also note, NAFCU’s Regulatory Affairs staff will issue a Final Regulation summarizing the key aspects of this rule.  Once it is available, it will be located here.

Other actions taken during the open board meeting include:

• An announcement that federally insured credit unions will likely pay no Corporate Stabilization Fund assessment in 2014;
• Approval of a budget of $268.3 million to fund NCUA’s activities in 2014, including no increase in authorized staffing levels;
• Approval of a decrease of 18.4 percent in the 2014 federal credit union Operating Fee scale that also exempts 303 credit unions with assets below $1 million; and
• Approval of a 2014 Overhead Transfer Rate of 69.2 percent to fund the Share Insurance Fund’s activities.

For detailed information on all actions taken during the open meeting, take a look at this message from NAFCU and NCUA’s Board Action Bulletin. 

CFPB Finalizes TILA/RESPA Integrated Disclosure Rule; 2013 NAFCU Compliance Seminar Group Photo

Written by JiJi Bahhur, Director of Regulatory Compliance

After more than two years of research and testing, the Consumer Financial Protection Bureau (CFPB) issued – this past Wednesday – the long-anticipated Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) rule.  Among several highlights from the rule, it provides for new, easier-to-use integrated disclosures, also known as the “Know Before You Owe” mortgage forms, that clearly lay out the terms of a mortgage for a homebuyer. The purposes of these new integrated disclosures are to provide improved consumer understanding, better comparison shopping, and avoid costly and unexpected surprises at the closing table. 

Currently, credit unions are required to provide two separate disclosures – “early” TILA Statement and Good Faith Estimate (GFE) – within three business days after receiving a mortgage application.  Under the final rule, these disclosures would be combined into one early disclosure document, the Loan Estimate, which borrowers must receive within three days after application.

Also, credit unions are currently required to provide two separate closing disclosures – final TILA Statement and HUD-1 Settlement Statement – three business days before closing on a loan.  The final rule combines the final TILA and HUD-1 disclosures into one closing form, the Closing Disclosure, which borrowers must receive three days before closing.

The TILA/RESPA rule (and mandatory use of the new integrated forms) is set to take effect on August 1, 2015.  While this extended implementation time is a win for credit unions – and something NAFCU pushed the CFPB for – it is important to note that the rule is 1,888 pages long and will require your credit union to make significant changes to how it conducts a mortgage transaction.

For a quick look at some of the other highlights from the rule, take a look at this message from Carrie Hunt, NAFCU’s Senior Vice President of Government Affairs/General Counsel.  Also note, NAFCU will issue a Final Regulation providing a summary of the final rule.  When it is available, you can find it here (NAFCU log-in required).

For further information on these new integrated mortgage disclosures, check out these CFPB resources:

• CFPB Press Release
• Factsheet about the “Know Before You Owe” Mortgage Disclosures
• The TILA/RESPA Mortgage Disclosure Rule

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On a lighter note, I’d love to share the group photo from NAFCU’s Regulatory Compliance Seminar that took place this past October in Nashville, Tennessee.  It was a great crowd and we look forward to seeing you all next year in Baltimore, Maryland. 

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Have a fabulous weekend!

NCUA’s Final Rule on Liquidity and Contingency Funding Plans

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Recently, we blogged about NCUA’s final rule on liquidity and contingency funding plans. The rule, which applies to federally insured credit unions (but not corporate credit unions), is effective March 31, 2014.

Earlier this week, NCUA released a video on its YouTube channel to assist credit unions in complying with the rule. The video features Larry Fazio, Director of the Office of Examination and Insurance, and J. Owen Cole, Jr., Director of the Division of Capital and Credit Markets.

NCUA also issued Letter to Credit Unions 13-CU-10 to advise federally insured credit unions of their responsibilities under the final rule, explain the impetus for the rule, and provide guidance on certain liquidity planning expectations and provisions of the rule.  Here’s an excerpt from the letter discussing key liquidity sources:

“What are the key sources of liquidity NCUA looks for in credit union plans?

There are three categories of liquidity sources that apply to liquidity planning. Each of these sources is relevant to the underlying safety and soundness of a credit union’s liquidity management program. Essentially, these sources act as layers of liquidity protection and function similar to a series of financial firewalls. The three categories are:

1.  On-balance-sheet liquidity. Maintaining a balance-sheet cushion of highly liquid assets is your first line of protection. It is essential for credit unions of all sizes to hold an adequate safeguard of cash and cash equivalents (such as short-term deposits and short-maturity Treasuries). A simple rule of thumb is to identify the largest liquidity outflow your credit union has ever experienced and how long it persisted. Then set your on-balance-sheet liquidity target based on that experience. This liquidity cushion will buy you some time to avoid service disruptions and enter external funding arrangements if they become necessary.
2. Access to market sources of funds. Your second line of protection is to be in a position to borrow from market counterparties. You can build borrowing relationships with a corporate credit union, a correspondent bank, a Federal Home Loan Bank, or with repurchase agreement counterparties (or all of these), to name a few. You need to keep in mind your credit union’s ability to borrow from market funding sources will require unencumbered assets acceptable to lenders, which can be readily pledged against your loan. Larger credit unions with greater potential funding needs should have multiple stable borrowing sources and a clear understanding of which assets can be pledged.
3.  Contingent federal liquidity providers. The third line of protection is access to a contingent federal liquidity provider such as the Discount Window or CLF. The Discount Window and CLF exist to provide backup liquidity in circumstances where on-balance-sheet liquidity and market funding sources prove inadequate. While sparingly used, the Discount Window and CLF have proven to be dependable sources of liquidity in times of crisis or unexpected events. Like the funding sources, the Discount Window and CLF are both collateral-based lending facilities. All loans must be fully secured with a first priority security interest.

Generally, a credit union responding to liquidity demands will work through these sources in the above order. Your credit union needs to specify in its plan which sources it can access and the priority of steps to follow. NCUA recognizes liquidity resources may have changed for many credit unions because of the recent financial crisis. This means you may need to establish new relationships with market counterparties and contingent federal liquidity facilities.

For most credit unions, the first two sources of liquidity are already integrated into their day-to-day operations. However, because emergency liquidity is not an everyday need, most credit unions have not yet chosen to establish relations with a contingent federal liquidity source. Of the credit unions that are now required to access a contingent federal liquidity source, slightly more than half have already established relations with the Discount Window and/or CLF.”

See Letter to Credit Unions 13-CU-10 for complete details, including NCUA’s recommended timetable for compliance action steps.  NAFCU’s Regulatory Affairs Team has also prepared a Final Regulation Summary (13-EF-27) for NAFCU members.

CFPB's ANPR on Debt Collection Practices; NCUA Update: Looking Ahead to 2014 Webcast

Written by JiJi Bahhur, Director of Regulatory Compliance

Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued an Advance Notice of Proposed Rulemaking (ANPR) seeking to gather information and data about debt collection practices.  The ANPR requests information on a wide range of debt collection issues and practices, including accuracy of information used by debt collectors, procedures for ensuring consumers know their rights, and avenues of communication used by collectors to recover debts.

The CFPB began accepting debt collection complaints back in July, 2013, and also announced that it will begin adding these consumer complaints to its public Consumer Complaint Database.   It is quite apparent that the CFPB has consumer protection laws regarding debt collection practices on its radar and will continue to explore these practices in order to determine whether rulemakings or other actions are appropriate. 

To view the ANPR, click here.  Also, for a quick look at what types of questions the CFPB is seeking comment and information gathering on, take a look at the press release here.

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NCUA Update: Looking Ahead to 2014.  On December 10, 2013, NAFCU’s Regulatory Affairs team will provide a look ahead into the affairs of NCUA, including updates on loan participations, capital reform, examinations, stress testing, securitization, corporate stabilization fund, the NCUSIF, derivatives, NCUA restructuring and more!  You won’t want to miss this one!  And, it’s open to all!  To register, click here. 

NCUA Releases Risk Management Expectations

Written by JiJi Bahhur, Director of Regulatory Compliance

Last Tuesday, the National Credit Union Administration (NCUA) released Letter to Credit Unions 13-CU-12 and a Supervisory Letter, clarifying its supervisory expectations for credit unions’ risk management processes.  The Supervisory Letter begins with a detailed overview of enterprise risk management (ERM) and then goes into NCUA’s risk management expectations for natural person credit unions. 

Although enterprise risk management (ERM) is not a regulatory requirement for natural person credit unions, the Supervisory Letter provides that the core ERM principles can be integrated into the overall infrastructure of credit unions of all sizes.  During the examination process, NCUA examiners will be ensuring that smaller, less complex natural person credit unions have a sufficient risk management framework in place to manage major risks within the credit union.  For larger, more complex natural person credit unions, examiners will ensure that a more comprehensive risk management program is employed. 

For further detail regarding the NCUA’s expectations with regard to natural person credit unions’ risk management programs, take a look at 13-CU-12 here and the Supervisory Letter here.  In all cases, no matter credit union size, examiners are expected to take a risk-based approach when evaluating a credit union’s risk management processes.  The Supervisory Letter covers what factors the examiner will consider when examining the credit union and explains the “total analysis process” it will employ when evaluating the credit union and measuring its risk. 

CFPB Announces Website Tool, Issues Interpretive Rule and Bulletin on Homeownership Counseling List Requirements

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Last Friday, the CFPB announced the availability of a new tool on its website to help consumers find local housing counseling agencies. In conjunction with that announcement, the CFPB also released an interpretive final rule, rule summary, and Bulletin 2013-13 providing instructions and guidance for generating the lists of housing counseling agencies that lenders will be required to provide applicants for federally-related mortgage loans effective January 10, 2014.

Buried in the CFPB’s 2013 HOEPA final rule, the requirement to provide applicants for federally-related mortgage loans with a written list of HUD-approved housing counseling agencies is implemented in Regulation X, Section 1024.20(a)(1). Under the rule, lenders can generally obtain the lists in one of two ways:

• Generating lists using a website maintained by the CFPB for this purpose; or
• Generating lists independently using the same HUD data that the CFPB uses on HUD-approved counseling agencies, in accordance with CFPB’s list instructions.

The CFPB’s new tool is available for lenders that choose to use the first option.

Lenders that choose the second option will want to review the additional instructions in the CFPB’s interpretive final rule.  In Bulletin 2013-13, the CFPB recognizes that some lenders using the second option may not be able to bring their systems into compliance in time for the rule’s January 10, 2014 effective date.  The CFPB discusses this issue and provides an interim procedure that lenders can use “in good faith” while they are building their systems.  From the Bulletin:

“Accordingly, while lenders are incorporating § 1024.20(a)(1)(ii) list instructions into their systems, they may direct borrowers to the Bureau’s housing counseling agency website to obtain a list of housing counselors, using the format and text suggested below, www.consumerfinance.gov/find-a-housing-counselor. These steps, if taken by lenders in good faith while they are building their systems or are working with vendors to build systems, would achieve the goals of the regulation and would not raise supervisory or enforcement concerns.  Following is the suggested text to be used for this interim procedure:

“Housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost.

If you are interested in contacting a HUD-approved housing counseling agency in your area, you can visit the Consumer Financial Protection Bureau’s (CFPB) website, www.consumerfinance.gov/find-a-housing-counselor, and enter your zip code.

You can also access HUD’s housing counseling agency website via http://www.consumerfinance.gov/mortgagehelp/.

For additional assistance with locating a housing counseling agency, call the CFPB at 1-855-411-CFPB (2372).”

 See the interpretive final rule, summary, and bulletin for complete details.

CFPB Accepting Payday Loan Complaints; Free NCUA Webinars to Address Remittances and Mortgage Lending Rules; Programming Note

Written by JiJi Bahhur, Director of Regulatory Compliance

Payday Loan Complaints.  As we’ve mentioned on other occasions, payday lending is definitely on the CFPB’s radar.  Yesterday, this was further confirmed through the CFPB’s blog where it announced that consumer complaints regarding payday loans are now being accepted.  From the blog:

“Starting today you can submit a complaint if you have a problem with your payday loan. You can submit a complaint about:

• Unexpected fees or interest
• Unauthorized or incorrect charges to your bank account
• Payments not being credited to your loan
• Problems contacting the lender
• Receiving a loan you did not apply for
• Not receiving money after you applied for a loan."

The CFPB uses this complaint data to identify business practices that may pose risks to consumers, which in turn will pave the way for new payday lending rules and regulations. 

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NCUA Webinars on Remittances and Mortgage Lending Rules.  In a press release yesterday, the NCUA announced that it will host a free, two-part webinar, “New Dodd-Frank Remittances and Mortgage Lending Rules.”  The first part, which will cover remittance transfers, higher-priced mortgage loan appraisals, mortgage servicing, and higher-priced mortgage loan escrows, will take place at 2:00pm Eastern on November 18, 2013.  The second part, which will cover ability-to-repay and qualified mortgages, high-cost mortgage and home ownership counseling, loan originator compensation, and Equal Credit Opportunity Act appraisals and valuations, will take place at 2:00pm Eastern on December 18, 2013. 

Credit unions should take advantage of these free high-level overviews.  Click here to register for the November 18 session and here to register for the December 18 session.

If you are looking for additional compliance assistance on these new rules and regulations, the NCUA also issued regulatory alerts and YouTube videos summarizing the rules and highlighting issues of particular importance for credit unions. 

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Programming Note.  NAFCU’s offices will close today at noon and remain closed until Tuesday for the long holiday weekend.  We’ll be back to blogging next Wednesday!  Have a great weekend!

Remittance Rule Safe Harbor List; November Compliance Monitor Available; Meet the NAFCU Family (Fun Video Alert)!

Written by JiJi Bahhur, Director of Regulatory Compliance

Remittance Rule Safe Harbor List.  Yesterday, the CFPB published a notice of the current safe harbor list of countries that qualify for an exception in the remittance rule.  The list, effective concurrently with the final remittance rule on October 28, 2013, remains unchanged from the initial release on September 26, 2012.

To provide some background, the final remittance rule generally requires remittance transfer providers to give consumers sending remittance transfers certain specified disclosures, including the applicable exchange rate, any fees imposed and taxes collected by the provider, and covered third-party fees.  The safe harbor list provides an exception: it permits estimates of certain disclosures when a remittance transfer provider cannot determine the exact amounts it must disclose at the time the disclosures are required because the laws of the recipient country do not permit such determinations. 

The list currently contains the following countries: Aruba, Brazil, China, Ethiopia, and Libya.  The CFPB intends to revise the list periodically; however, none of the countries currently listed will be removed from the list prior to July 1, 2014. 

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November Compliance Monitor.  The November 2013 NAFCU Compliance Monitor is now available for download by NAFCU members. This month's articles are on Mortgage Servicing: Error Resolution & Information Request Procedures and the NCUA Common Bond Advertising Requirements.  And, of course,
the latest Compliance Calendar is also available.

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NAFCU Video.  Ever wonder who you’re speaking with when you call in to NAFCU?  Or even who is behind these crazy blog postings?  Well wonder no more!  Meet the folks that provide you with Extreme Member Services every day.  This video will definitely make your Wednesday!

NCUA Report: Protecting Members from Holiday Fraudsters; NAFCU's 2014 Technology and Security Conference

Written by Bernadette Clair, Regulatory Compliance Counsel

Recently, my colleague Tessema Tefferi blogged about the importance of cybersecurity awareness, providing links to many useful resources credit unions can use to manage cybersecurity risks. Although credit unions’ websites and computer systems are the main target of attacks such as Distributed Denial-of-Service (DDoS) attacks, it’s important to remember that fraudsters often target members directly, attempting to steal personal information through identity theft scams, social engineering, and computer malware, to name just a few methods. Educating members about information security and how they can protect their personal information is one tool credit unions can use to help mitigate some of the cybersecurity risks.

Along these lines, NCUA’s October 2013 Report that we blogged about last week, includes an article on Protecting Members from Holiday Fraudsters, just in time for the start of the holiday shopping season. The article encourages credit unions to educate members about how they can protect themselves against fraud, and provides strategies members can use to detect and avoid falling victim to fraud and identity theft. From the article:

“Review Credit Reports at Least Once a Year. This will help your members ensure fraudulent accounts have not been opened using their personal information. Additionally, the Fair Credit Reporting Act entitles consumers to a free credit report once a year from each of the three nationwide credit reporting agencies. Members can receive their report by contacting the credit reporting agencies directly or by visiting www.annualcreditreport.com.

Monitor Financial Statements and Online Banking Regularly. Members should get into the routine of checking their statements and periodically reviewing their account transactions and online activities. This will help members identify unauthorized account activities early, preventing potential losses to their personal accounts and negative impact to your credit union’s reputation.

Ensure Children Understand What Information to Provide Online. Fraudsters will often use a game or a free offer that will request personal information, or will include spyware to track and steal information from a member’s computer or mobile device. Members can protect themselves by encouraging their children to limit online contact to friends they actually know, setting privacy controls to restrict access to private information, and enabling parental controls that allow access to only trusted sites. Members should also talk to their children about not giving out their name, address, date of birth, or any other personal information online without talking to a parent first.

Beware of Downloading Sneaky Apps. Smartphone or social networking applications may provide application developers with access to your members’ personal information, such as their messages, contacts, emails and photos. Often, this information isn’t related to the application’s purpose. Instead developers may share member’s information with marketers or other third parties. Members should read the privacy policy of each application before downloading to understand what private information they are sharing.

Shred Documents with Personal and Financial Information. Financial statements, credit card offers and billing statements are examples of documents members should be shredding. Consider hosting a shred day at your credit union so members can safely discard their personal and financial records.

Look Out for Scams Involving Social Engineering. Fraudsters may impersonate a credit union (or other legitimate organizations) to trick members into giving out personal account information. This social engineering tactic is often utilized as part of an elaborate scheme involving phone calls, emails, text messages and other forms of communication. Remind members to never reply to unsolicited telephone, email, text or pop-up messages asking for personal account information. Members should understand legitimate organizations never ask for sensitive information over unsecured communication channels. Also, educate members on what policies and procedures your credit union follows when requesting sensitive information.”

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NAFCU's 2014 Technology and Security Conference. Speaking of cybersecurity, NAFCU’s 2014 Technology and Security Conference, which will be held February 11-13 in Las Vegas, is a great place to discover the latest credit union security and technology trends. Conference topics include fraud trends, core processing issues, big data and credit union crisis management. Registration discounts are in effect until Nov. 15th. Check out more information about the conference and register here.

No News Left Behind

Written by JiJi Bahhur, Director of Regulatory Compliance

It would be nearly impossible to cover every piece of news that drops in any single month, but we try our best to cover as many notable items that may impact credit unions here on NAFCU’s Compliance Blog.  Today, I’d like to point to a few items that we did not have a chance to mention during the busy month of October.

NCUA Guidance on DORs and Exam Findings.  NCUA issued Letter to Credit Unions 13-CU-09 to streamline the examination report and clarify for federally insured credit unions the difference between a document of resolution and examiner findings.  New processes related to issuing and following up on the examination report are also being implemented by the agency.  Under the new process, examiners are now required to follow up with credit union officials on outstanding DOR items within 120 days after the timeframe for completion has passed.  The changes to the examination report and the new processes are contained in the agency’s revised National Supervision Program Manual.  The agency stated that full implementation will begin with examinations that start after January 1, 2014.

Electronic Filings.  NCUA issued a final rule, effective January 1, 2014, that requires all federally insured credit unions to file quarterly call reports and profile data electronically using NCUA’s information management system or other electronic means specified by the agency.  Manual filing of this information is no longer an option for federally insured credit unions. NCUA guidance and the extended call report deadlines for 2014 are available in Letter to Credit Unions 13-CU-11.

No Share Insurance Premium for 2013. Announced during the October NCUA Board meeting, insured credit unions will not be assessed a share insurance premium for 2013.  The NCUSIF ended September at a ratio equal to 1.31 percent of insured shares, above the statutory minimum of 1.2 percent. If the fund ends the year above that level, any excess would be transferred to the Temporary Corporate Credit Union Stabilization Fund. The NCUSIF's year-to-date net income was $110.3 million; a negative $25 million was budgeted this year.

Flood Hazard Interagency Proposal.  The NCUA Board issued an interagency proposed rule regarding loans in areas having special flood hazards.  The proposal amends the agency’s regulations on federal flood insurance to implement provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters).  It establishes: 1) that regulated lending institutions must accept “private flood insurance,” as defined in Biggert-Waters, as satisfaction of the flood insurance requirement;  2) an expansion of the escrow requirement for flood insurance payments to all residential loans secured by residential real estate; and 3) a clarification of the provisions relating to force placement of flood insurance.  A Regulatory Alert with an analysis of the proposal will be provided to NAFCU members.  Currently, existing guidance that NCUA has issued still applies to credit unions.

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 Have a great weekend!