Recent News

What BECU is Doing about Upcoming FACTA Changes

Tina Narron, BECU & CLC Regulatory Comment Committee Member
September 2, 2010

Many credit unions are currently analyzing the FACTA regulation changes effective January 1, 2011. The regulation will require all borrowers to receive a notice if the terms of the approved credit are materially less favorable than the most favorable terms available.

At BECU, we not only reviewed our options internally but we consulted with our business partners to understand available options and solutions through both platform providers and credit data providers.

Here is a summary of the options available:

Consumer to Consumer Comparison – all borrowers would be compared to each other in order to determine if they received the most favorable terms available.  This method would require a manual comparison to a pool of sample borrowers that would need to be updated no less than every two years. 

Credit Score Proxy Method – this method would require a credit score cutoff that represents a point where 40% of all approved applications have higher credit scores than the other 60%.  The borrowers in the 60% range would be required to receive the notice.  This method is not tied towards the tiers internal to the credit union, and the cutoff score would need to be recalculated every two years.  Borrowers who receive the best rate could still possibly receive the notice. 

Tiered Pricing Method – this method requires that 60% of the tiers would receive the notice (for five or more tiers,) or for all non “A” tier applications (for four or less tiers.)  This method is not based on volumes, but based on the number of tiers.  This method does not disclose the actual credit score to borrowers.

The BECU Lending and Compliance departments worked to together to decide on the Tiered Pricing Method for non Home Equity loans. Some of the benefits that swayed our decision were:

New Risk Based Pricing Notices would be generated for the tiers underlined below.

VISA

LOC

Auto

Boat & RV

Tier

Tier

Tier

Tier

A

A

A

A

B

B

B

B

C

C

C

C

D

D

D

 

E

 

E

 

Sample Risk Based Pricing Notices:

BECU has limited Repayment Terms and Max LTV guidelines for lower tier auto loans. We have a second notice sample that will be sent to the auto loan population. All other products will receive the alternate version, disclosing an APR increase only.

Home Equity FACTA Letters – BECU will continue to send the FACTA notices with FICO score to all Home Equity borrowers. BECU will modify the existing FACTA letters based on the regulation model. We have also created a separate FACTA letter to Home Equity applicants with no FICO score.

Sample Home Equity FACTA Notices:

Vendor Responsibilities:

 

SBA Touts Loan System Overhaul Five Years after Katrina

Michelle Samaad
August 31, 2010

The SBA looked to the owners of a New Orleans seafood processor as an example of how the agency said it was not prepared to handle the deluge of relief requests after Hurricane Katrina.

Tommy's Seafood suffered major damage to its two facilities including equipment and inventory loss after the catastrophic storm in August 2005 caused destruction on the Gulf Coast, the SBA said. Tommy and Maria DeLaune, the business' owners, had applied for an SBA disaster loan in October 2005 but didn't get approved until May 2006 and the loan wasn't fully disbursed until October 2006, a year later, the SBA said.

The seafood processor and wholesaler suffered another setback when the BP oil spill closed fishing waters where its suppliers worked. The DeLaunes had to seek seafood 500 miles away resulting in higher expenses and lower profit margins, according to the SBA. However, unlike Katrina, the couple said their SBA experience this time around was “amazing,” the agency said. Their disaster loan was approved in 16 days and it was fully disbursed just a month later. The SBA said it also deferred their existing Katrina loan for 12 months so they can use more of their resources to deal with the financial strain caused by the oil spill.

“SBA was not prepared, nor fully equipped to effectively provide assistance in the wake of [the Katrina] disaster. But we've learned from our mistakes and, today, we have a much better disaster assistance program in place with increased staff, improved technology and training, and a streamlined loan process,” the agency said.

In an Aug. 24 Associated Press article, former SBA loan officers who processed loans after Katrina, gave accounts of the bungled system including alleged claims of loan distribution discrimination based on income, race and location. Others said backlogged applications were canceled for no reason. Supervisors held contests with cash prizes to reward loan officers who cleared the most applications, often through outright rejections. Thousands of frustrated business owners gave up on receiving a disaster loan.

Today, the SBA said the agency's reaction to the oil spill is a result of its efforts to clean and speed up its disaster loan processing system. The agency said it reduced its average processing time from more than 70 days to 10. Applicants can now apply online. Loan processing centers workstations have increased from 366 to 1,750 and SBA disaster staff went from 800 to 1,200.

This article was originally published in Credit Union Times at www.cutimes.com and is reprinted with permission.

Remote Deposit Capture is Focus of New Tech Council White Paper

CUNA Councils
August 24, 2010

Remote Deposit Capture (RDC) promises to extend greater convenience to members while at the same time potentially reducing operational costs and investment in building infrastructure, according to a new white paper from the CUNA Technology Council.

RDC is when a member or business account holder utilizes an optical scanning device, such as a home-office scanner or mobile cell phone camera, to capture (scan) images of checks for deposit, upload them to a computer on site, and through a software application, edit and send the front and back images securely over the Internet to the credit union for processing and deposit.

As noted in “Remote Deposit Capture: Thinking Out of the Branch To Better Serve Members,” RDC is a valuable tool for credit unions that have:

RDC may also prove useful to credit unions that have a small number of branches in comparison to a large field of membership, as is the case with some select employee group (SEG)-based credit unions.

The new white paper covers key points related to RDC and RDC application development, including:

In addition, four credit unions are profiled through in-depth case studies, providing the reader with an understanding of how remote deposit capture functions as well as its primary challenges and advantages.

CUNA Council members are entitled to complimentary copies of these and more than 200 white papers; non-members may purchase the white papers for a price of $50 per copy.

The paper is available online in the white paper section of each council site – select the “Tech” tab.

Obama Administration's Scorecard Shows Housing Prices Level after 30 Months in Decline

National Mortgage Professionals
August 24, 2010

The U.S. Department of Housing & Urban Development (HUD) and the U.S. Department of the Treasury have released the August edition of the Obama Administration's Housing Scorecard, a comprehensive report on the nation's housing market. In July, housing prices remained level after 30 straight months of decline, while some price predictions have improved. In addition, historic low interest rates continued to promote home affordability and refinancing options for the nation's families. However, the market remains fragile with foreclosure starts showing a slight increase and serious delinquencies continuing to work through the pipeline.

"While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said HUD Assistant Secretary Raphael Bostic. "Through the Obama Administration's efforts over the past 16 months, we have seen increased price stabilization and improved home affordability for prospective, qualified homebuyers. At the same time, we know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation's hardest hit neighborhoods.”

The August Housing Scorecard features key data on the health of the housing market including:

"HAMP, which represents just one, targeted piece of the Administration's larger efforts on housing, has so far offered more than a million and half responsible homeowners the chance to modify their mortgages. This program has helped to stabilize a housing market that remains fragile and has redefined the modification standard for the industry—both of which are delivering real benefits to struggling homeowners in communities across the country," said Treasury Assistant Secretary for Financial Stability Herb Allison. "Currently servicers are working through their pending modifications, and while Making Home Affordable works for a number of homeowners, many others are offered other means of avoiding foreclosure. As careful stewards of the scarce resources of the American taxpayer, we see this as prudent progress—and we will keep working to help the Americans hardest hit by this crisis.”

Data in the scorecard show that the recovery in the housing market continues to remain fragile, with some measures suggesting recovery will take place over time. For example, foreclosure starts went up slightly in July from the previous month, but remain well below July 2009 levels.

Foreclosure completions also inched upward as the volume of serious delinquencies continues to work through the pipeline.

Each month, the Housing Scorecard incorporates key housing market indicators and highlights the impact of the Administration's unprecedented housing recovery efforts, including assistance to homeowners through the FHA and HAMP. For more information, visit www.hud.gov/scorecard.

Reprinted with permission from http://nationalmortgageprofessional.com, a source of origination, settlement, and servicing news and opinion for the financial industry regarding mortgage lending.

Effective Strategies for Credit Card Pricing is Subject of Latest OpSS Council White Paper

CUNA Councils
August 19, 2010

Credit unions have a real opportunity to gain credit card market share from banks today, according to a new white paper by the CUNA Operations, Sales & Service (OpSS) Council. Even before the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) took effect, big banks were drawing consumers' ire, between the bailouts, their reactions to the economy's effects on their credit card programs and their preparations for the new regulatory environment.

The new paper, “Credit Card Pricing: Effective Strategies for a Post-CARD Act Market,” notes that with a well-designed, competitive value proposition—including pricing strategies that make their cards attractive without posing excessive risk—and a comprehensive marketing/communications plan that trumpets the credit union difference, credit cards can still be a credit union's highest-yielding asset.

This white paper for the CUNA OpSS Council specifically discusses:

It also includes three case studies showing how credit unions' pricing has evolved to fit today's marketplace.

CUNA Council members are entitled to complimentary copies of these and more than 200 white papers; non-members may purchase the white papers for a price of $50 per copy.

The paper is available online in the white paper section of each council site – select the “OpSS” tab.

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