A Wednesday Hodgepodge

October 2, 2019 at 9:12 am Leave a comment

Good morning. Yours truly is back from a college tour in the great Northeast, and there are a lot of odds and ends I need to catch you up on. First, however, congratulations to all you Nats fans out there. Your team finally won a big game. Now don’t get me wrong, all you won was the right to lose to the Dodgers, but at least that’s something. Besides, that was the most fired up Washington crowd I’ve heard since the Redskins were good. Maybe D.C. can get united about something after all. Now onto the material you read the blog for.

Beware of the Business Appraisal Rule

CU Today is reporting that an advisory group of the National Association of Credit Union Service Organizations put out a welcomed reminder telling credit unions to practice “careful restraint” when it comes to taking advantage of the new commercial real estate appraisal requirements for credit unions, which take effect in this month.

Their warning should be taken to heart. In July, the NCUA finalized a regulation that increases the threshold for required appraisals in commercial real estate transactions from the current $250,000 to $1 million. The regulation was an aggressive move by Chairman Hood and Board Member McWaters, who argued that the increased threshold did not raise safety and soundness concerns and would help credit unions provide member business loans. The decision was a controversial one. Credit unions now have more commercial real estate transaction flexibility than do banks. Board Member Harper voted against the proposal. Against this backdrop, even though only 4% of credit unions make these types of loans, you can bet that the industry will be under the microscope with critics anxious to point to this new regulation as an example of NCUA being too aggressive.

Treasury Moves Forward with GSE Reform

Lest anyone doubt that the Trump Administration is serious about moving forward with major reforms of the secondary housing market, those doubts should be put to rest once and for all. On Monday, the Treasury announced that it would be authorizing Fannie Mae and Freddie Mac to retain up to $25 and $20 billion in earnings, respectively, as opposed to the $3 billion capital cushion at which they are currently capped. This means that the government is deciding that it will no longer be taking almost all the profits being generated by the GSEs.

More than a decade ago now, when the government gave the GSEs a $200 billion line of credit and a huge bailout, it received preferred shares which made it the first in line to receive dividend payments. This has proven to be an incredibly lucrative investment for the government, and has led to lawsuits with irate shareholders claiming that the government has effectively taken their profits for themselves. The cynics among us have even suggested that the profits are so appealing that the government would never want to privatize Fannie and Freddie. This is the clearest sign yet that their cynicism is misplaced. The Treasury’s ultimate goal is to allow Fannie and Freddie to build up huge capital reserves and then function as private entities absent implicit government support. Just how much of this goal can be accomplished without Congressional support remains to be seen.

Arbitration Update

In a recent blog, I said that all medium to large sized credit unions should consider putting arbitration agreements into their account agreements and their HR handbooks. Now that the Supreme Court has consistently and emphatically upheld the legality of such arrangements, it is almost negligent not to consider making this move if your credit union is large enough to be the target of class action lawsuits. Those of you interested in looking into the issue further would be well advised to take a look at this excellent analysis of the issue provided by the Weil, Gotshal & Manges LLP’s September employment law report. The firm summarizes several cases demonstrating how courts are going to scrutinize arbitration agreements to make sure that employees affirmatively agree to be subject to arbitration clauses. I also think some of the concepts are useful when getting your members onboard with arbitration.

Collins Pleads Guilty, Resigns

Western New York Republican Congressman Chris Collins resigned yesterday after pleading guilty to insider trading charges. Nationally, Collins is best known for being the first sitting Congressman to endorse Donald Trump. Trump ended up winning the district by 26 points, but Collins only narrowly won reelection in 2018 after being arrested on the insider trading charges. Credit unions in New York will also remember Collins and his staff for being well-informed and generally supportive of credit unions and their issues. Governor Cuomo will call a special election to fill the vacancy.

Entry filed under: Compliance, HR, Mortgage Lending, New York State. Tags: , , , , , , .

“Ugh.” Second Chance IRPS Provides Much Needed Clarity for CU Employees and Applicants

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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