May 19, 2014
Monday Edition
Court keeps NCUA N.Y. RMBS suit alive

The District Court of New York has denied a motion to dismiss a lawsuit involving the National Credit Union Administration and Wachovia Capital Markets, LLC, now known as Wells Fargo Securities, LLC.

This is the latest in a series of lawsuits brought by the NCUA to various banking institutions on behalf of several corporate credit unions that purchased large amounts of residential mortgage-backed securities in the years between 2005 and 2007 and have since been liquidated. NCUA's complaints generally assert that the offering documents used to sell residential MBS contained material misstatements and/or omissions.

In this case, the NCUA is serving as the liquidating agent for Southwest Corporate FCU and Members United Corporate FCU. Southwest Corporate FCU purchased two RMBS certificates from what was then called Wachovia Capital Markets, in June and December of 2006, for a total of $25,738,350. Both certificates were rated AAA at the time of purchase but were downgraded to junk status by mid-2009, and by June 2013 approximately 25 percent of the loans for each certificate were delinquent.

The NCUA has claimed that American Mortgage Network, Inc. (AmNet), which originated 100 percent of the loans in the first certificate, known as AMN1, had a high percentage of "originate-to-distribute" loans, which it said encourages shoddy underwriting practices because the securitization of mortgage loans breaks down the direct relationship between the borrower and the lender.

Wachovia claimed that a forensic analysis of AMN1 "found materially higher LTV (loan-to-value) ratios and lower owner-occupancy rates" than those listed in the offering documents by the NCUA.

The court found that the NCUA has plausibly pled its claims related to the underwriting conduct for loans contained in the first certificate, noting that while there is "no single set of allegations that every plaintiff must include to state a plausible claim," NCUA presented enough factual content to allow the court to draw a reasonable inference.

Click here to read the full story from CUNA News Now. 

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President's point

Over the last several years, as we have re-affiliated credit unions, we began offering a League orientation. This year we took that idea a step further and each quarter will hold regional “Goodwill” visits and orientations with non-affiliates, as well as some affiliated credit unions. Many credit unions are getting new CEOs and new management, so it’s a good way for them to become familiar with the various offerings of the LSCU & Affiliates.  Plus, for many long-time non-affiliates they only can equate the League to either the Alabama or Florida Credit Union Leagues, so it’s important for them to know what the LSCU has to offer them through the value of affiliation.

Last week three members of our management team and I met with MidFlorida, CFE, Fairwinds, Campus USA, SunState, and Florida Credit Union. The $2B MidFlorida has been a non-affiliate for a few years. Our goodwill visit paid dividends right out of the gate. We had a great meeting with Kevin Jones, MidFlorida’s CEO, and one of his directors, Tim Harris. Thursday night MidFlorida’s board voted to re-affiliate immediately. During our meeting, Kevin and Tim talked about the importance of being part of the credit union system, the responsibility that leadership brings, and wanting to work cooperatively with other credit unions in the chapter as well as supporting small credit unions.

The other visits we had were also very productive. Campus USA is transitioning to a new CEO so we wanted to meet with him and some of his management team to not only show them how we are working for them, but how they can get more involved with the League. The same holds true for SunState which also promoted a new CEO from within during the last year. The visits with the affiliated credit unions were also a good time to get feedback from them on how we are doing at the League and LEVERAGE, as well as areas where we can improve. One thing I hope all of you know about me is that I’m not afraid to have a crucial conversation about how the League is performing. I always welcome constructive feedback.

As we make these quarterly goodwill visits, it’s important that credit unions see that the League brings value to many layers of their staff, not just the CEO. For the credit union to get the most out of the League, it really needs to plug in at different levels. Many credit union staff members can take part in our grassroots advocacy, chapter events, our many webinars, our conferences and workshops and read our publications. The Young Professionals Group is a great way to have younger staff get involved and also learn more about the credit union system.

We already have plans to do our next goodwill tour in Alabama in July. In October, we will meet with more credit unions in Florida. The exact dates and credit unions have not been finalized. After reading this, I hope you will go to our website and look around at the opportunities you and your credit union have to get engaged with us.

Where’s Patrick: This week I will work out of the Tallahassee offices and prepare for our LSCU Governance Committee Meeting, as well as hold our monthly LEVERAGE meeting. To see my tentative schedule for the next two weeks, visit the LSCU Information for Credit Unions webpage.

Visit the LSCU YouTube page for the President's Quarterly video.

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Rep. Terry drafts a House patent 'troll' bill

Rep. Lee Terry (R-NE) last week released draft legislation to address illegitimate patent demand letters where so-called "patent trolls" use low-quality patents in an effort to extract settlements from credit unions and other businesses. Terry, chairman of the Commerce, Manufacturing, and Trade Subcommittee of the House Energy and Commerce Committee, plans to hold a hearing on the bill on Thursday.

Many trolls are aware that the cost of hiring a patent attorney is a deterrent to credit unions and others, and price their proposed licenses in such a way that they are sure to be lower than the cost of counsel to evaluate the demand.

"Patent trolls cost American companies tens of billions of dollars each year, and are threatening job creation and innovation," Terry said when announcing his new bill.

Terry said his draft legislation would increase transparency and accountability to help expose and prevent fraudulent infringement claims. It would do so by requiring patent demand letters to include certain basic information to help companies determine whether a letter is legitimate.

The bill also would increase the Federal Trade Commission's authority to levy fines on fraudulent patent demand practices and provide state Attorney General enforcement of the federal standard.

Terry's bill is a follow-up to broad patent litigation reform approved by the House last December, which did not address the issue of abusive patent assertion letters.

Click here to read the full story from CUNA News Now.

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LEVERAGE partner CO-OP announces EMV agreement with Visa

LEVERAGE wants to keep credit unions informed of the latest developments of our business partners. LEVERAGE believes that it is important for credit unions to be in the know of all the services and opportunities available to you through our many partnerships.

With that said, LEVERAGE partner CO-OP Financial Services recently announced an agreement with Visa to use the Visa U.S. Common Debit AID (application identifier). This means that CO-OP now has a Durbin-compliant EMV solution for debit issuers. LEVERAGE supports CO-OP’s agreement with Visa and the similar agreement CO-OP is now in negotiation with MasterCard.

To read the full letter click here. For questions, contact Janice Jordan.

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In This Issue
Monday Edition
Court keeps NCUA N.Y. RMBS suit alive
President's point
Rep. Terry drafts a House patent 'troll' bill
LEVERAGE partner CO-OP announces EMV agreement with Visa
LSCU & Affiliates Media

Risk-Based Capital Presentation
The League is holding risk-based capital meetings across both states ahead of the May 28 NCUA comment due date. This presentation is perfect to show to staff and boards.

Florida Financial Literacy Bill
In 2014, the Florida Legislature considered HB 367 and SB 212 which would require a half credit of financial literacy to graduate. Bill sponsors Sen. Dorothy Hukill and Rep. Heather Fitzenhagen talk about its need and how credit unions can help.

Upcoming Event Deadlines
TODAY Last Day to Register - LSCU Disaster Recovery Conference - Mobile, AL
TODAY Last Day to Register -  LSCU OFAC/BSA Basic & Advanced School - Birmingham, AL
May 21 Last Day to Register - LSCU Disaster Recovery Conference - Jacksonville, FL
June 18 Last Day for Early Bird Rate – LSCU BSA Essentials & Advanced Workshops – Mobile, AL
June 18 Last Day for Early Bird Rate – LSCU BSA Essentials & Advanced Workshops – Huntsville, AL
July 1 Last Day for Early Bird Rate – Southeast Supervisory Committee Conference – Point Clear, AL
July 15 Last Day to Register - LSCU BSA Essentials & Advanced Workshops - Mobile, AL
July 15 Last Day to Register - LSCU BSA Essentials & Advanced Workshops - Huntsville, AL
Upcoming League Events
May 20 - Disaster Recovery Conference, Mobile AL
May 20 - OFAC & BSA Basic & Advanced School, Birmingham, AL
May 20 - New ACH Security Requirements
May 21 - OFAC & BSA Basic & Advanced School, Birmingham, AL
May 21 - Increasing Regulatory Requirements
May 22 - Disaster Recovery Conf, Jacksonville FL
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