You can never have too much information, especially if your job is to help keep your credit union on the straight and narrow. When I started on my compliance journey, one of the greatest resources that I used, and continue to use to this day, were examination manuals.
Recently, federal examiners released an updated lending examination manual and because it includes the pending integrated mortgage disclosure requirements, it is well worth your read. For example, Section V-1.9 contains a great chart to answer the age old question of what costs should be included in mortgage finance charges. What these manuals do is provide concise but informative summaries on the issues that your examiners will be reviewing when they come into your credit union. Unfortunately, New York State’s Department of Financial Services does not have its manual available on its website. Perhaps that is something that can be addressed in the future. Even if you don’t do compliance, but just need to get a quick overview of a trending compliance issue, these manuals are a great place to start.
Another OCC resource to check out is the OCC’s semi-annual report on banking trends. Although many of the risks it highlights are hardly surprising, it is still worth taking a look. Like the NCUA, the OCC continues to be concerned with the usual suspects of evolving cyber threats, the temptation to relax underwriting standards too much as competition for loans heats up, and of course, interest-rate risks. Like their credit union counter parts, the OCC is concerned that smaller institutions in particular – those with less than $1 billion in assets – are still stretching out their investments too long in the search for higher yield. One day the examiners will be justified in this concern, I’m just not sure in what future decade.
Incidentally, one interesting little factoid that I pulled from the report has to do with auto lending. According to the OCC, 60% of loans originated by banks in the fourth quarter of 2014 had a term of 72 months or longer. In addition, the OCC is becoming concerned with collateral advance rates. It reports that the average loan to value ratio for used auto loans was 137%. In addition, loan to value ratios for borrowers with credit scores lower than 620 averaged 150%. Statistics like these justify the increased scrutiny that auto lending is getting from New York State Legislators and regulators.
Epilogue: DOL Posts Overtime Proposal
As expected, the U.S. Department of Labor formally posted proposed regulations increasing the salary threshold for employees to be considered exempt to $50,400. When the proposal came out, the Association staff HR guru Chris Pajak and I looked at some industry-wide numbers and this proposal could have a huge impact on many credit unions. For instance, many of the CEOs of the smallest credit unions have salaries hovering right around $50,000. The same is true for many of the people you probably consider exempt employees, such as your teller supervisors and your compliance directors. Even if these employees don’t typically work overtime, the regulations mean that if you currently don’t track the hours these employees work, you’re going to have to start.
One aspect of the proposed regulations that I haven’t talked about includes an exception for “highly compensated employees (HTE).” As a very general rule, if an employee receives a base salary of at least $23,000 but receives compensation of at least $100,000 and performs at least one of the functions of an exempt employee, then that employee is exempt from overtime pay requirements. The DOL is proposing to increase the HTE threshold from $100,000 to $120,000.
Epilogue: My Big, Fat Greek Default
Despite a last second request for emergency credit, Greece officially defaulted on a debt payment due to its international creditors last night. The next big date to look for is July 6, when the Greeks hold a referendum on whether or not to accept the latest loan bailout requirements.
Greece’s troubles are already having an impact on our economy. The stock market has tumbled, bond prices are gyrating, and with corporate profits declining in the second quarter it appears that those who thought that the economy was gaining momentum were, once again, overly optimistic.