Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

# Show Notes: NCUA Vice Chairman Hauptman's 2024 ACU Congressional Caucus Remarks

## Key Points:

1. Records Retention Policy Update
   - NCUA revising policies to limit required retention periods
   - Prompted by feedback from credit unions

2. Overdraft and NSF Fees
   - Hauptman opposes forcing large credit unions to publicly state revenue from these fees
   - Warns against over-regulation potentially limiting financial access

3. Technology and Innovation
   - NCUA exploring AI for fraud detection and customer service
   - Discussion on digital assets and stablecoins in credit union evolution

## Notable Quotes:

- "The only people who think compliance is easy are those that don't have to do it."
- "America's more than 140 million credit union members know their lives better than we do."
- "My true north is making sure credit unions don't go the way of Blockbuster video because their regulator wouldn't let them compete."

## Context:
- Speech delivered on September 9, 2024
- Hauptman's term on the NCUA Board ends in August 2025

## Call to Action:
For assistance with NCUA exams, contact Mark Treichel at marktreichel.com or on LinkedIn.

Hello, this is Samantha Shares. This episode covers Transcript of Chair Powell’s Press Conference Opening Statement September 18, 2024

The following is an audio version of that transcript.    This podcast is educational and is not legal advice.  We are sponsored by Credit Union Exam Solutions Incorporated, whose team has over two hundred and Forty years of National Credit Union  Administration experience.  We assist our clients with N C U A so they save time and money.  If you are worried about a recent, upcoming or in process N C U A examination, reach out to learn how they can assist at Mark Treichel DOT COM.  Also check out our other podcast called With Flying Colors where we provide tips on how to achieve success with N C U A.

And now Chairman Powell’s opening statement.

Transcript of Chair Powell’s Press Conference Opening Statement September 18, 2024

CHAIR POWELL. Good afternoon. My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Our economy is strong overall and has made significant progress toward our goals over the past two years. The labor market has cooled from its formerly overheated state. Inflation has eased substantially from a peak of 7 percent to an estimated 2.2 percent as of August. We are committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal.

Today, the Federal Open Market Committee decided to reduce the degree of policy restraint by lowering our policy interest rate by 1/2 percentage point. This decision reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2 percent. We also decided to continue to reduce our securities holdings. I will have more to say about monetary policy after briefly reviewing economic developments.

Recent indicators suggest that economic activity has continued to expand at a solid pace. GDP rose at an annual rate of 2.2 percent in the first half of the year, and available data point to a roughly similar pace of growth this quarter. Growth of consumer spending has remained resilient, and investment in equipment and intangibles has picked up from its anemic pace last year. In the housing sector, investment fell back in the second quarter after rising strongly in the first. Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year. In our Summary of Economic

Projections, Committee participants generally expect GDP growth to remain solid, with a median projection of 2 percent over the next few years.

In the labor market, conditions have continued to cool. Payroll job gains averaged 116 thousand per month over the past three months, a notable stepdown from the pace seen earlier in the year. The unemployment rate has moved up but remains low at 4.2 percent. Nominal wage growth has eased over the past year and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than just before the pandemic in 2019. The labor market is not a source of elevated inflationary pressures. The median projection for the unemployment rate in the SEP is 4.4 percent at the end of this year, 4 tenths higher than projected in June.

Inflation has eased notably over the past two years but remains above our longer-run goal of 2 percent. Estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.2 percent over the 12 months ending in August; and that, excluding the volatile food and energy categories, core PCE prices rose 2.7 percent. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. The median projection in the SEP for total PCE inflation is 2.3 percent this year and 2.1 percent next year, somewhat lower than projected in June. Thereafter, the median projection is 2 percent.

Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. For much of the past three years, inflation ran well above our 2 percent goal, and labor market conditions were extremely tight. Our primary focus had been on bringing down inflation, and appropriately so. We are acutely aware that high inflation imposes significant hardship as it erodes purchasing power,

especially for those least able to meet the higher costs of essentials like food, housing, and transportation.

Our restrictive monetary policy has helped restore the balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remain well anchored. Our patient approach over the past year has paid dividends: Inflation is now much closer to our objective, and we have gained greater confidence that inflation is moving sustainably toward 2 percent.

As inflation has declined and the labor market has cooled, the upside risks to inflation have diminished and the downside risks to employment have increased. We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks to both sides of our dual mandate.

In light of the progress on inflation and the balance of risks, at today’s meeting the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point, to 4-3/4 percent to 5 percent. This recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance. We are not on any preset

course. We will continue to make our decisions meeting by meeting.

We know that reducing policy restraint too quickly could hinder progress on inflation. At the same time, reducing restraint too slowly could unduly weaken economic activity and employment. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.

In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward. If the economy evolves as expected, the median participant projects that the appropriate level of the federal funds rate will be 4.4 percent at the end of this year and 3.4 percent at the end of 2025. These median projections are lower than in June, consistent with the projections for lower inflation and higher unemployment, as well as the changed balance of risks. These projections, however, are not a Committee plan or decision.

As the economy evolves, monetary policy will adjust in order to best promote our maximum employment and price stability goals. If the economy remains solid and inflation persists, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.

- Topic: NCUA Chairman Todd Harper's vision for the future of credit unions
- Occasion: 90th anniversary of the Federal Credit Union Act
- Key principles for credit union success over next 90 years:

1. Transparency
   - Public disclosure of executive compensation (proposed rule)
   - Reporting of overdraft/NSF fees for large credit unions
   - Advocating for third-party vendor authority

2. Fairness 
   - Focus on serving underserved populations
   - Advancing diversity, equity, inclusion, and accessibility
   - New rule on quality control for automated valuation models

3. Vigilance
   - Active management of risks, especially cybersecurity
   - Proposed rule on incentive-based compensation for large credit unions

4. Foresight
   - Addressing credit union consolidation trend
   - Proposed rule requiring succession planning

- Emphasis on long-term stewardship and positive impact
- Call for continued innovation and focus on member needs

The podcast notes avoid reproducing any copyrighted song lyrics or extensive quotes from the article.

# Show Notes: CFPB on Housing - Prepared Remarks of CFPB Director Rohit Chopra

## Episode Overview
This episode covers the prepared remarks of CFPB Director Rohit Chopra at the National Housing Conference on September 9, 2024. The remarks focus on mortgage refinancing and its potential impact on homeowners and the economy.

## Key Points
1. Interest rates and their impact on mortgage decisions
2. Current state of the mortgage refinancing market
3. Expectations for lower interest rates in the future
4. Potential benefits of refinancing for homeowners and the economy
5. Obstacles to refinancing, including closing costs and complexity
6. CFPB actions to improve the refinancing process

## Detailed Notes

### Current Mortgage Market
- Interest rates peaked at 7.79% in October 2023, now eased to 6.35%
- Over 12 million mortgages have interest rates above 5%
- Potential for millions of borrowers to benefit from refinancing as rates decline

### Obstacles to Refinancing
- High closing costs
- Complexity of the refinancing process
- Potential disparities in refinancing opportunities for minority homeowners

### CFPB Actions
1. Monitoring implementation of new mortgage technology, including AI
2. Exploring changes to mortgage regulations to streamline refinancing
3. Pursuing rules to accelerate "open banking" in mortgages

### Conclusion
- Lower interest rates expected
- Focus on ensuring benefits reach a broad range of homeowners
- Potential economic boost from widespread refinancing

## Sponsorship
This podcast is sponsored by Credit Union Exam Solutions Incorporated, offering assistance with NCUA examinations.

## Additional Resources
- Check out the "With Flying Colors" podcast for tips on NCUA success
- For credit union exam assistance, visit marktreichel.com or connect on LinkedIn

Key Points:

1. Federal banking agencies released a statement on potential risks of banks using third parties to deliver deposit products and services.

2. Highlights risk management practices for banks to consider when managing these arrangements.

3. Reemphasizes existing guidance; does not create new requirements or expectations.

4. Identifies potential risks in areas like:
   - Operational and compliance issues
   - Growth and liquidity management  
   - Misrepresentation of deposit insurance

5. Provides examples of effective risk management practices, including:
   - Robust governance and third-party risk management
   - Managing operational and compliance implications
   - AML/CFT and sanctions compliance 
   - Managing growth, liquidity and capital impacts
   - Addressing deposit insurance misrepresentations

6. Includes list of existing regulatory resources and guidance for banks to reference

Key Takeaways:
- Increasing use of third parties for deposit products raises potential risks
- Banks remain responsible for regulatory compliance even when using third parties
- Effective risk management and oversight is crucial as these arrangements evolve
- Banks should review existing guidance and ensure appropriate controls are in pla

NCUA's Proposed Incentive-based Compensation Rule

This episode, hosted by Samantha Shares, provides a detailed summary of the NCUA's proposed incentive-based compensation rule, which implements Section 956 of the Dodd-Frank Act. This regulation is designed to address flawed compensation practices contributing to the 2008 financial crisis, covering financial institutions with $1 billion or more in assets.

 Introduction
 Overview of the Proposed Rule
 Scope of the Regulation
 Tiered Structure and Definitions
 Requirements for Covered Institutions
 Additional Requirements for Level 1 and Level 2 Institutions
 Regulatory Flexibility and International Context
 Public Comments and Enforcement Provisions
 Conclusion and Contact Information

Hello, this is Samantha Shares. This episode is a high level summary of the final interagency guidance on reconsiderations of value (R O V) for residential real estate valuations

 This podcast is educational and is not legal advice.  We are sponsored by Credit Union Exam Solutions Incorporated, whose team has over two hundred and Forty years of National Credit Union  Administration experience.  We assist our clients with N C U A so they save time and money.  If you are worried about a recent, upcoming or in process N C U A examination, reach out to learn how they can assist at Mark Treichel DOT COM.  Also check out our other podcast called With Flying Colors where we provide tips on how to achieve success with N C U A.

And now the summary.

1. Purpose and Scope:

   - The guidance is issued by the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency.

   - It aims to highlight risks associated with deficient residential real estate valuations and describe how credit unions can incorporate R O V processes into their risk management functions.

   - The scope is limited to real estate-related financial transactions secured by single 1-4 family residential properties.

2. Background and Importance:

   - Credible collateral valuations, including appraisals, are essential to the integrity of residential real estate lending.

   - Deficient valuations can result from prohibited discrimination, errors, omissions, or inappropriate valuation methods.

   - Such deficiencies can prevent individuals and families from building wealth through homeownership and pose risks to credit unions.

3. Regulatory Context:

   - The guidance references several relevant laws and regulations, including:

     - Equal Credit Opportunity Act (ECOA) and Regulation B

     - Fair Housing Act (FH Act)

     - Truth in Lending Act (TILA) and Regulation Z

     - Uniform Standards of Professional Appraisal Practice (USPAP)

   - It emphasizes that credit unions must comply with these laws and operate in a safe and sound manner.

4. Reconsideration of Value (R O V) Process:

   - An R O V is a request from the financial institution to the appraiser or valuation preparer to reassess the report based on potential deficiencies or new information.

   - R O Vs can be initiated by the institution's review process or after consideration of consumer-provided information.

   - The guidance allows credit unions to implement R O V policies and procedures to review relevant information not considered in the original valuation.

5. Use of Third Parties:

   - The use of third parties in the valuation review process does not diminish an institution's responsibility to comply with applicable laws and regulations.

   - Credit unions are expected to manage risks arising from third-party valuations and valuation review functions.

6. Complaint Resolution Process:

   - Credit unions can capture consumer feedback on potential valuation deficiencies through existing complaint resolution processes.

   - The process should cover complaints from various channels and sources.

   - Complaints can be an important indicator of potential risks and risk management weaknesses.

7. Recommendations for Policies, Procedures, and Control Systems:

   - Consider R O Vs as a possible resolution for valuation complaints

   - Establish processes for identifying, managing, analyzing, escalating, and resolving valuation-related complaints

   - Inform and educate consumers on how to raise valuation concerns early in the underwriting process

   - Identify stakeholders and outline roles and responsibilities for processing R O V requests

   - Establish risk-based R O V systems to route requests to appropriate business units

   - Use standardized processes to increase consistency in handling R O V requests

   - Ensure relevant staff, including third parties, are trained to identify valuation deficiencies, including practices that may result in discrimination

8. Flexibility in Implementation:

   - The guidance is principles-based and does not mandate specific requirements.

   - It allows credit unions flexibility in implementation based on their size, complexity, and risk profile.

   - Smaller credit unions may have policies and procedures that differ from larger credit unions.

9. Regulatory Expectations:

   - While the guidance does not have the force of law or regulation, it outlines supervisory expectations for how credit unions should handle R O Vs and valuation-related complaints.

   - Credit unions are expected to incorporate these considerations into their risk management practices.

10. Potential Impact:

    - The guidance aims to improve the integrity of the residential real estate lending process by addressing potential deficiencies in valuations.

    - It may help mitigate risks associated with discrimination in property valuations and improve consumer protection in the lending process.

This guidance provides a framework for credit unions to develop and implement R O V processes that align with regulatory expectations and help ensure the credibility and fairness of residential real estate valuations.

This concludes the final interagency guidance on reconsiderations of value (R O Vs) for residential real estate valuations.

If your Credit union could use assistance with your exam, reach out to Mark Treichel on LinkedIn, or at mark Treichel dot com.  This is Samantha Shares and we Thank you for listening.

Board Approves Revised Proposal on Succession Planning

The NCUA Board approved by a vote of 2-1 a proposed rule
that requires boards of directors at federally insured credit unions to establish and adhere to processes for succession planning. This new proposed rule modifies the 2022 proposal
based on the public comments received and upon further consideration of the issues.

“Succession planning is vital to the long-term success of any institution, including credit unions,” Chairman Harper said. “A credit union board’s failure to plan for the transition of its management and key decision-makers could come with high costs, including the potential for an unanticipated merger of the credit union when key personnel depart. In my view, it’s better to maintain many small credit unions serving a wide variety of purposes and niche markets than continuing to consolidate credit unions into ever larger institutions.”

Under the revised proposal, boards of directors at federally insured credit unions would be required to establish written succession plans that address specified executive and other positions. Additionally, each board of directors would be required to review the succession plan in accordance with a schedule it establishes, but no less than annually. The plan would be required to address the credit union’s strategy for recruiting candidates to assume each of the key positions and promote the credit union’s safe and sound operation.

The NCUA Board encourages all credit unions, regardless of asset size, to have a succession plan to fill key positions and ensure continuity of their operations. These succession plans should be consistent with the size and complexity of the credit union. The proposed rule includes a suggested succession plan template
(Opens new window) that may be appropriate for smaller credit unions.

Comments on the proposed rule must be received no later than 60 days following publication in the Federal Register.

1. Episode topic: Interagency Statement on the Issuance of the AML/CFT Program Notices of Proposed Rulemaking

2. Date of issuance: June 28, 2024

3. Agencies involved:
   - U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN)
   - Board of Governors of the Federal Reserve System
   - Federal Deposit Insurance Corporation
   - National Credit Union Administration
   - Office of the Comptroller of the Currency

4. Purpose: To amend AML/CFT program requirements for financial institutions subject to the Bank Secrecy Act (BSA)

5. Key proposed changes:
   - New statement of purpose for AML/CFT programs
   - Risk assessment process requirements
   - Fostering innovative approaches to BSA compliance
   - Requirement for U.S. presence

6. Alignment with Anti-Money Laundering Act of 2020 (AML Act) purposes

7. Broader implementation efforts:
   - Updates to supervision and examination processes
   - Enhanced feedback loops
   - Additional AML Act reviews

8. Note that these changes are separate from the Corporate Transparency Act implementation

9. Podcast sponsored by Credit Union Exam Solutions Inc.

10. Presenter: Samantha Shares

11. Additional resource mentioned: "With Flying Colors" podcast for NCUA success tips

12. Contact for assistance: Mark Treichel (LinkedIn or marktreichel.com)

These notes capture the main points discussed in the podcast about the proposed rulemaking and its implications for financial institutions.

Federal Credit Union Loan Interest Rate Ceiling

In this episode, Samantha Shares delves into the NCUA's new proposed rule on the Federal Credit Union Loan Interest Rate Ceiling that was voted on at the July 18th Board Meeting. With a vote of 3-0, the proposed rule has been passed, maintaining the temporary 18 percent interest rate ceiling for loans made by federal credit unions. Join us for an in-depth discussion featuring real audio from the meeting, including detailed analyses, historical contexts, and the implications for credit unions and their members.