BOARD ACTIONS JULY 2012 (FROM PAGE 3)
of proposed rulemaking issued in December 2011. Comments
on the proposed rule are due by Sept. 28, 2012.
For more information, see page 5.
Proposed Rule Modifies
“Troubled Condition” Definition
The NCUA Board voted to issue a proposed rule allowing the
agency to declare a federally insured, state-chartered credit
union (FISCU) to be in troubled condition according to NCUA’s
assigned CAMEL rating. Only a state supervisory authority
(SSA) can now make this declaration for a FISCU. Credit unions
with a troubled condition designation, which have a CAMEL
code 4 or 5 composite rating, are subject to enhanced
supervision designed to protect the NCUSIF from loss.
The NCUSIF has seen an increase in the number of credit
unions with assets between $250 million and $500 million
experiencing some degree of financial stress. As a result,
NCUA has increased the number of joint FISCU
examinations in which it participates with SSAs. In some
instances, NCUA and the applicable SSA have issued different
While the actual number of examinations where this has
happened is relatively small, it is nonetheless significant from
a supervisory perspective, particularly given the rise in credit
unions experiencing stress.
The Board issued the proposed rule with a 60-day comment
period. Comments on the proposed rule are due by Oct. 1, 2012.
Joint Agency Rulemaking on Appraisals
Required by Dodd-Frank Act
The Board received a briefing from the Office of General
Counsel and the Office of Examination and Insurance on an
upcoming interagency proposed rulemaking on appraisals
required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act (DFA).
The DFA established a new section in the Truth in Lending
Act (TILA). This section sets forth appraisal requirements
applicable to higher-risk mortgages, including the need to
obtain written appraisals based on a physical interior
inspection of the property, protections against mortgage
flipping scams, and access to free appraisal reports.
DFA requires NCUA, the Federal Reserve Board of
Governors, the Office of the Comptroller of the Currency, the
Consumer Financial Protection Bureau, the Federal Deposit
Insurance Corporation, and the Federal Housing Finance
Agency to jointly issue final rules to implement this new
section of TILA by Jan. 21, 2013. NCUA is working through
its approval process, and along with the other agencies,
anticipates issuing the proposed rule on appraisals this month
or shortly thereafter.
After the agencies publish the proposed rule in the Federal
Register, interested parties will have an opportunity to comment.
NCUSIF and Stabilization Fund Remain Stable
The Chief Financial Officer reported that the NCUSIF equity
ratio was 1.30 percent as of June 30, which is the normal
operating level set by the Board. This ratio is based on an
estimated insured share base of $839 billion as of June 30, and
reflects the additional 1 percent deposit adjustment that NCUA
will bill in September to account for growth in insured shares.
For the second quarter of 2012, the NCUSIF reported gross
income of $53.5 million, operating expenses of $34.6 million,
and insurance loss expenses of $32.3 million, resulting in a
net loss of $13.4 million for the quarter. First-half net income
for the NCUSIF was $5.5 million.
There were 12 consumer credit union failures in the first half of
2012. Six were assisted mergers, and six were involuntary
liquidations, of which five were assisted purchase and
assumptions. The cost of these failures through June 30 was
The number of CAMEL code 3, 4, or 5 credit unions increased
slightly from the previous quarter. CAMEL code 4 and 5 credit
unions increased by three, for a total of 399 as of June 2012.
Assets and shares were $30.0 billion and $26.8 billion,
respectively. As a percentage, CAMEL code 4 and 5 credit
unions represent 3. 2 percent of total estimated insured shares.
Additionally, CAMEL code 3 credit unions increased by 17,
for a total of 1,679 as of June 2012. Assets and shares were
$138.0 billion and $123.0 billion, respectively. CAMEL code
3 credit unions represented 14.7 percent of the total estimated
insured shares as of June 2012. Overall, 16.1 percent of all
credit union assets were in CAMEL code 3, 4, or 5
institutions, a small improvement from 16.3 percent at the
end of the first quarter.
As of June 30, the net position of the Stabilization Fund was
negative $5.1 billion, reflecting a slight change from the negative
$5.3 billion net position reported at the end of 2011. In the
second quarter, the Stabilization Fund repaid $300 million to
the U.S. Treasury, reducing the outstanding borrowing to $3.2
billion. The Stabilization Fund had net operating income of
$17.5 million for the quarter and $126.8 million through June
30. The 2012 financial data for the NCUSIF and the
Stabilization Fund is preliminary and unaudited.
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