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Board Action Bulletin

Matz Calls for Legislative Action on Vendor Authority as NCUA Board Approves Joint Agency Proposed Rule on Appraisal Management Companies

ALEXANDRIA, Va. (March 20, 2014) – The National Credit Union Administration Board convened its third scheduled open meeting of 2014 at the agency’s headquarters here today. Board Members received an update on the Temporary Corporate Credit Union Stabilization Fund and unanimously approved a joint agency proposed rule on minimum requirements for appraisal management companies.

Net Position of Stabilization Fund Improves by Nearly $3.4 Billion
NCUA’s Chief Financial Officer reported on the Stabilization Fund’s operations, based on audited information. For 2013, the net position of the Stabilization Fund improved by nearly $3.4 billion from a $3.5 billion deficit at Dec. 31, 2012, to a $142.2 million deficit at Dec. 31, 2013.

“Effectively managing the Stabilization Fund to minimize federally insured credit union assessments is a top NCUA priority,” NCUA Board Chairman Debbie Matz said. “Settlements with JPMorgan Chase and Bank of America, coupled with improvements in anticipated future cash flows from legacy assets of the NCUA Guaranteed Notes program, led to a sizable improvement in the Stabilization Fund’s net position in 2013. I’m hopeful we can forgo charging assessments not only in 2014, but in future years as well.”

The NCUA Board announced at the November 2013 meeting there is no planned Stabilization Fund assessment for 2014.

The Stabilization Fund had $2.9 billion in outstanding borrowings with the U.S. Treasury on Dec. 31, 2013, a decrease of $2.2 billion for the year.

When the Stabilization Fund has outstanding borrowings from the U.S. Treasury, the Federal Credit Union Act requires NCUA to make a distribution from the Share Insurance Fund if the Share Insurance Fund has an equity ratio above the normal operating level of 1.30 percent at year’s end. As a result, NCUA transferred $95.3 million to the Stabilization Fund, which will reduce future cash needs of the Stabilization Fund. Before the transfer, the Share Insurance Fund equity ratio was 1.31 percent.

The Stabilization Fund recently received an unmodified, or clean, audit opinion for the fifth year in a row from the independent auditor KPMG LLP.

Proposed Joint Agency Rule Points Out Need for Vendor Authority
Board members approved a proposed joint agency rule on minimum requirements for appraisal management companies, but Chairman Matz noted that NCUA will not be able to enforce it because of a statutory obstacle.

“We face a regulatory blind spot,” Matz said. “NCUA can approve this interagency rule, which would strengthen regulation of appraisal management companies and should help prevent conflicts of interest, but we are unable to enforce it. NCUA remains the only financial services regulator lacking the necessary authority to examine vendors for safety and soundness and compliance with laws and regulations. NCUA will continue to call on Congress to provide this authority.”

Six federal financial regulatory agencies, including NCUA, are proposing the rule to implement the requirements of Section 1124 of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 as added by Section 1473 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The intent is to better ensure the quality of appraisals and assure compliance with the Truth in Lending Act.

The proposed rule would set minimum requirements for registration and supervision of appraisal management companies, which serve as intermediaries for appraisers and lenders and provide appraisal services. These requirements would apply to states that elect to establish an agency with authority to register and supervise appraisal management companies. Under the proposed rule, an appraisal management company that is a subsidiary of a financial institution and regulated by a federal financial services regulatory agency would not be required to register with a state, but would otherwise be required to meet the same minimum requirements as other appraisal management companies.

NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. NCUA also live streams, archives and posts videos of open Board meetings online.