Gary Hess presented "Hot Topics" at CUConferences 2011 Spring Training conference.

1. Hot Topics Spring Training Conference 2011

3. Regulatory Changes

4. Discussion

5. Intellectual Property Issues

6. Lending Decline

7. Going mobile

9. Why Does it Matter? It is part of the responsibility taken on by directors. Federal Credit Union Bylaws Article VI. Section 6. The board has the general direction and control of the affairs of this credit union and is responsible for performing all the duties customarily performed by boards of directors. Directing the affairs of the credit union in accordance with the Act, these bylaws, the rules and regulations and sound business practices.

12. Letter to Credit Unions 11-CU-01 Appropriate policies and procedures for all aspects of the foreclosure process, tailored to comply with the laws of each state the credit union does business in; Experienced and knowledgeable staff qualified to handle foreclosures; Effective internal controls surrounding the foreclosure process; Adequate oversight, due diligence, and control of third-party servicers performing foreclosures on behalf of the credit union;1 Legally compliant documentation to support foreclosure actions; and Appropriate reporting to the board of directors of the number and volume of foreclosure actions and their financial impact on the credit union.

13. NCUA Budget Chairperson Matz statement in 12/10 newsletter: This situation caused us to re-evaluate NCUA’s resource needs as well as examination procedures. As a result, NCUA hired 57 field staff this year. To be effective, however, the field staff needed to be reinforced by more frequent exams. We, therefore, began examining credit unions at least annually. By conducting more frequent exams and increasing off-site supervision, we are identifying issues earlier.

15. Director Liability

16. Dodd – Frank

17. Safe Act

18. 2011

21. NCUA Regulation Section 701.4

22. Effective January 27, 2011

23. Mandatory compliance is July 27, 2011

24. Directors Affected – ALL

25. Elected, appointed, serving prior to January 27th must comply by July 27th

28. Working familiarity with basic finance and accounting practices

29. Read and understand a federal credit union’s balance sheet

30. Read and understand a federal credit union’s income statement

33. NCUA Regulation Section 701.33

34. Effective January 27, 2011

35. Mandatory compliance is January 27, 2011

38. Dodd – Frank

40. 12 – January 2011 to March 2011

41. 27 – April 2011 to June 2011

43. Deposit Insurance

44. Permanent $250,000 Coverage

45. Unlimited Coverage??

47. Prepayment penalty information

48. The parcel number and value of the property securing the loan

49. The loan’s term (in months)

50. The channel through which the application was received

51. A SAFE Act unique identifier

53. “Qualified Mortgage” concept

54. Yield Spread Premium compensation eliminated

57. S.A.F.E. Act Application NCUA rules apply to federal credit unions and privately insured credit unions State chartered credit unions and cuso employees are subject to state licensing through NMLS

59. Financial institutions must require employees acting as residential mortgage loan originators to comply with the S.A.F.E. Act's requirements to register and obtain a unique identifier;

61. S.A.F.E. Act Definitions Mortgage loan originator – i) Takes a residential mortgage loan application; and(ii) Offers or negotiates terms of a residential mortgage loan for compensation or gain: (iii) make more than 5 mortgage loans a year

62. S.A.F.E. Act Key Elements Mortgage loan originator (MLO) Must be registered, not licensed Registration is with the Nationwide Mortgage Licensing System and Registry (http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx)

63. S.A.F.E. Act Key Elements MLO to provide: Fingerprints Information for background checks Receive unique identifier

64. S.A.F.E Act Credit Union Req. "follow on" check of the data that has been entered into the national system. The institution will be responsible for the accuracy of the data the individual LO entered. Institutions must enter specific data into the system so that the LO as well as the institution are properly registered. the nature, size, complexity, and scope of their mortgage lending activities.

65. Additional Regulations

67. Do you offer Risk Based Pricing Loan Programs?

68. Do you use Credit Scores to determine APR offered to each member?

70. Internal procedures

72. Effect – past model forms no longer provide “safe harbor” is used

73. New model form, if used properly, does provide “safe harbor”

74. No substantive rights changes

76. July 2010 Implementation for new members

77. August 15, 2010 Implementation for existing members

80. Michigan First Credit Union and First Michigan Bank (service mark for Michigan First)

81. Patent Troll – law suits filed for infringement of patent on message alerts

83. 2010 – Loan portfolios declined by 1%; first time in 30 years. (CUNA)

84. 2010 – Savings balances increased by 4.5% (CUNA)

86. iPad Apps?

87. Mobile Apps?Free or charge for it?

88. ALDS – Game 1

89. Thank You Gary Hess Gary.hess@rtefs.com 320-281-9765

90. Resources FFIEC S.A.F.E. Act FAQ’s http://www.ffiec.gov/safeact.htm Nationwide Mortgage Licensing System http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx NCUA SAFE Act Letter to Credit Unions 10-CU-13

91. Resources NCUA Regulatory Alert 10-RA-15 http://www.ncua.gov/Resources/RegulatoryAlerts/Files/2010/10-RA-15.pdf FRB Dodd-Frank Calendar http://www.federalreserve.gov/newsevents/reform_milestones.htm