Home Mortgage Disclosure Act Data Collection Requirements for Calendar Year 2022

Regulatory Alert (22-RA-01) Home Mortgage Disclosure Act Data Collection Requirements for Calendar Year 2022 Dear Boards of Directors and Chief Executive Officers: If your credit union makes residential mortgage loans and meets all four criteria outlined below, you must comply with the Consumer Financial Protection Bureau’s Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). Regulation C requires you to collect HMDA data associated with mortgage loan applications processed during 2022, if: Your credit union’s total assets as of December 31, 2021, exceeded $50 million; Your credit union had a home or branch office in a Metropolitan Statistical Area on December 31, 2021; Your credit union originated at least one home purchase loan (other than temporary financing such as a construction loan) or refinanced a home purchase loan, secured by a first lien on a one-to-four unit dwelling during 2021; and Your credit union originated at least 100 covered closed-end mortgage loans in each of the two preceding calendar years (2020 and 2021) or at least 200 covered open-end lines of credit in each of the two preceding calendar years (2020 and 2021). Read the Regulatory Alert

Some See a Ongoing Rise in Used Car Values, Some Big Lenders Disagree

DETROIT––Not everyone agrees with those analysts who are forecasting used car values and demand for loans will continue to rise in 2021. In fact, Ally Financial said last week that it is embedding a potential 15% to 20% cumulative decline in used-auto values by the end of 2023 into its assumptions, the Wall Street Journal reported.

“It is natural for lenders and investors to anticipate the end of the current used-vehicle boom, and valuations of banks with big auto-finance businesses seem to partly reflect that,” the Journal reported. “Lenders such as Ally and Capital One Financial are trading at forward price-to-earnings valuations that are relatively low compared with where they normally trade versus S&P 500 banks overall, according to FactSet data.”

The Journal report noted that industry-tracker Cox Automotive has forecast that the Manheim index of used-car prices will be a mere 3% lower by this December than it was in December 2021.

“Perhaps a price decline could accelerate quickly the following year,” the Journal stated. “For the time being, though, things like the supply-chain snarls for chips that are making new cars take longer to build still appear to be a factor. Ally said that, although it is forecasting cautiously, ‘recent trends indicate ongoing resilience’ in used values.”

Tight Inventory

Despite high used-car prices, strong demand and tight inventory at auto dealers, the Journal reported that Ally and Huntington Bancshares both noted upticks in dealer credit utilization in their quarterly updates, “indicative of needing to finance inventory that isn’t instantly moving off the showroom floor. More new cars on lots might lead to fewer buyers winding up in the used-car market.”

Both General Motors and Ford Motor have also steered a way into the used car market via online platforms, the Journal added.

62% of Leases Bought Out

“That same trend of scarce inventory has also likely played a role in more vehicles being bought out at the end of leases—meaning that a lease financing provider isn’t able to take an off-lease car and sell it into the hot market,” the Journal added. “Ally reported that 62% of leases were bought out in 2021, compared with a figure typically closer to 30%, muting lenders’ upside to rising used values to a degree. Falling used-car prices would reduce the gains on selling cars, but they also could lead to more cars winding up in lenders’ hands in the first place.”

CUNA Mutual’s chief economist Steve Rick is saying credit unions should not expect to see any recession in the next five years.

MADISON, Wis.–Absent any “swan events,” such as wars, new pandemics or meteor strikes, CUNA Mutual’s chief economist is saying credit unions should not expect to see any recession in the next five years.

As part of the company’s January Trends Report on credit union performance (see related story), CUNA Mutual’s Steve Rick said that even with the Fed expected to raise interest rates multiple times in 2022, CUNA Mutual is currently forecasting that real gross domestic product will rise 4% this year, which is twice the long-run average of 2% growth rate, “as consumers spend some of their built-up savings on services, business rebuild inventories, housing construction continues to expand and infrastructure spending increases.”


“With no recession expected for the next five years and therefore less economic uncertainty, many businesses will also decide to increase spending on capital investment and many households will decide to build new homes,” Rick stated in the Trends report. “These trends will keep growth rates above the 2% trend.”

During the pandemic, Rick said a “dramatic shift” occurred in the composition of household spending, where the amount spent on services declined while spending on goods increased.

An Aging Population

“Over the next few years, as we transition from a COVID pandemic to an endemic, consumer spending will transition back towards the pre-pandemic trend of higher spending on services,” forecast Rick. “This trend was mainly driven by an aging population demanding additional healthcare services.”

NCUA - Proposed Rule Would Require Federal Credit Unions to Have Succession Plans

NCUA Board Approves Proposed

Rule on Succession Planning

Board Briefed on Supervisory Priorities, Status of Central Liquidity Facility

ALEXANDRIA, Va. (Jan. 27, 2022) – The National Credit Union Administration Board held its first open meeting of 2022 through a live webcast and approved a proposed rule on succession planning. The NCUA Board was briefed on the NCUA’s 2022 supervisory priorities and the status of the Central Liquidity Facility following the statutory expiration of its enhanced authority. The Board was also briefed on required inflation adjustments to the agency’s civil monetary penalties, which were approved by a notation vote at the end of 2021.

Proposed Rule Would Require Federal Credit Unions to Have Succession Plans

The NCUA Board approved by a vote of 2-1 a proposed rule that would require boards of directors at federal credit unions to establish and adhere to processes for succession planning.

“At its core, this rulemaking is about federal credit unions of all sizes — especially smaller credit unions that do not already have succession plans — planning for their futures, so they can continue to serve their members for generations to come as independent entities,” said NCUA Chairman Todd M. Harper. “Small credit unions are at the heart of the movement, and we need to find a better way to preserve them, instead of consolidating them.” View the entire press release​

Employers should take note, as company culture starts with professional development.

Employees and employers alike may have thought they understood company culture, and likely did until recently. Coming to work, knowing company values, interacting with others are all no brainers when it comes to the driving forces that make up company culture. Buy a seismic shift is occurring on two fronts. One, various generations are working together in multiple industries and two; the pandemic has changed attitudes about where work can occur and how that may or may not affect culture.

The Linkedin Global Trends 2022 report says more freedom to work where and when employees want, as well as attention to wellbeing, are important demands employers need to consider. Consider the numbers: when picking a new job, 63% of professionals put work-life balance as the top priority. Sixty percent are interested in compensation and benefits and 40% say the colleagues and culture they will be working with are their top priorities.

Employers should take note as company culture starts with professional development. Fifty-nine percent of those interviewed say the best way to improve culture is through professional development, whereas 48% say flexible work support are important. Rounding out the bottom three needs for improving company culture are mental health and wellness at 43%, training managers to lead remote and hybrid teams at 35%, and diversity and inclusion at 36%.

The trend is not only American. According to the report, the global average of candidates who consider company culture a top priority when picking a job is 40% — the Netherlands being the highest at 50%.

Company culture is one area employers can improve upon to maintain worker satisfaction. However, the pandemic has also led to what some call the Great Resignation or Great Reshuffle as workers leave jobs for greener pastures or simply to take a break. What this means is that companies need to differentiate themselves in a new way rather than clinging to the older ways of hiring.

For example, a 67% increase in engagement was noticed on Linkedin when company postings mentioned culture. From 2019 to 2021 there was a 362% increase of the mention of “flexible work,” a 35% increase of the mention of “wellbeing,” and a 15% increase in the mention of “company culture.” The report says that listening to your own people, being willing to change messaging, and getting leaders to talk about culture can tip the balance to booster the employer brand. Also recruiters have three things to consider as well: pressure testing your employee value proposition, being authentic and investing in onboarding. Overall, companies that want an edge, and want to be able to attract and retain employees during this unprecedented economic environment have to completely re-think their culture and what company culture means. Employee demands are shaping the new culture. Best to listen carefully.

CUTimes

Why People Don’t Want Credit Unions to Pull the Plug on Overdraft Services

More people use overdraft service as an intentional personal financial backstop than as a general safety measure, according to new research. Financial institutions that figure out better ways to fill this often critical need can counter the appeal of Chime and other challengers.

The familiar narrative out of Washington about overdraft service generally holds that consumers are hapless victims of evil banks, who set up overdraft plans like mousetraps to snatch fees.

It’s true that some institutions don’t have a history on overdraft policy to brag about, but much of the narrative is flawed because only a comparative few consumers wind up overdrawing by accident, according to a report on people’s attitudes towards overdraft from Curinos. In fact, the report confirms, many consumers depend on the availability of overdraft service as a form of quasi credit, and they don’t want it to be regulated out of existence.

“More than 60% of overdrafts come from consumers who intend to use the service,” the report states. “More than 80% of overdraft transactions come from consumers who opted in to debit card overdraft programs with the clear intention of using it to cover their payments.”

Even among the heaviest users of overdraft service, the surprise overdraft is relatively rare. Only 17% of consumers in that group who went into overdraft said it was because they did not know that their balance was running low. 

People Value Overdraft:

The research found that two thirds of consumers say that while overdraft is clearly expensive, they don’t want to lose access to the service.

This should give pause to institutions that think the sole answer for their consumer base is to follow institutions, like Ally, that have killed overdraft availability outright.

Making no change to your program, however, will likely cause your institution to fall behind competitively. Though many consumers don’t want to lose overdraft service, for banks and credit unions to merely stick to the same-old, same-old approaches is not going to cut it. Perceptions help drive product inspiration and marketing to laggards’ detriment.

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California-based credit union now offers bitcoin trading within its digital banking platform.

UNIFY Financial Credit Union ($3.6B, Torrance, CA), is leading the way into cryptocurrency, becoming the first credit union to allow members to buy, sell, and hold bitcoin within their credit union e-banking accounts.

On UNIFY’s crypto landing page, the credit union says the new offer will allow members to take advantage of lower transaction fees than other providers and faster money transfer periods to fund bitcoin transactions. Plus, they can avoid sharing personal information with unfamiliar crypto companies.

According to Allied Market Research, the global cryptocurrency market is expected to reach nearly $5 billion by 2030 from $1.49 billion in 2020. Trading exchanges are quickly becoming rivals to the traditional stock market, too, but the list of financial services providers participating in crypto remains limited.

The only major financial services providers that support bitcoin are Chime, Ally, USAA, Simple Bank, and Goldman Sachs, according to banks.com. Each supports bitcoin in various ways, from exchange trading to checking balances only to complete transaction functionality. Bank of America, Chase, and Citigroup explicitly ban or limit bitcoin purchasing.  

Meanwhile, according to Pew Research Center, 16% of U.S. adults have invested in, traded, or used some type of cryptocurrency. That figure jibes with UNIFY member surveys, says Greg Glawson, UNIFY’s chief information officer. The credit union sees both need and opportunity here.

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AI is trendy, but CUs can't fall into the common trap of pursuing trendy technologies only because everyone else is using them.

The past few years have been filled with complexity and change in the banking industry, which has also triggered a shift in how credit unions use artificial intelligence. We have witnessed an incremental increase in the use of AI in all aspects of banking, as it can reduce labor costs, increase efficiency and productivity, and help credit unions provide better service for their members. Traditionally, credit unions only leveraged AI to automate routine internal processes, like compliance, underwriting or fraud detection, but recent technological developments have led to AI now also being used for front-office purposes, like member service.

This trend will continue this year, as members of credit unions will default primarily to digital channels when searching for solutions to match their financial needs. When it comes to AI, we have seen consumers get particularly excited about features like uniquely tailored services or offerings that anticipate their needs, such as chatboxes or 24/7 customer service bots that can proactively start conversations and provide relevant information and recommendations at any time. Customer relationship management in banking was previously mainly conducted by humans, but AI is now leading the way.

Simply put, AI is trendy. But credit unions need to be careful not to fall into the common trap of pursuing trendy technologies only because everyone else is using them. Known as the shiny object syndrome (SOS), the want rather than need to implement AI can be more detrimental than beneficial for a multitude of reasons.

For starters, investing millions in data infrastructure, AI software tools, data expertise and model development due to a fear of missing out and without actually having a need or long-term strategic plan is an expensive and futile proposition. Even with a plan, acquiring AI without understanding its complexity or conducting a comprehensive proof of concept is wasteful, as the technology will be hard to implement and manage in the long term. One of the biggest mistakes credit union executives make is view AI as a technology with immediate returns, while in reality, months or years can pass before the technology starts bringing in the big wins that executives expected. Being strategic and cautious about acquiring technology should be the norm for all credit unions but is particularly crucial when it comes to AI.

Moreover, AI technology is still far from perfect, especially when it comes to customer service support. This deficit might not be a deterrent for big or medium-sized banks, as their focus has never been on delivering a personalized banking experience for their customers. But many credit union members have specifically chosen to bank with credit unions due to their ethos of caring for their communities and uniquely tailored member service offerings. If credit unions jump on the AI trend and start replacing humans with a substandard customer service bot, without conducting an in-depth market research and analysis beforehand, they gamble losing the essence of what differentiates them in the market.

So, what can credit unions do to avoid falling in the SOS trap?

 Continuing Reading

10 reasons why good managers sometimes make bad decisions

MOOSINNING, Germany–There are 10 reasons why good managers sometimes make bad decisions, according to one analysis.

Not surprisingly, the report by GreatWorkLife.com notes, when an otherwise competent manager starts making bad decisions, it can impact their team and the broader organization.

Among those 10 reasons:

Inexperience in Life or Leadership

 “A young manager just starting on their career in management might simply not have enough business and life experience to make a high percentage of good decisions,” GreatWorkLife.com observed. “Often a mistake of young managers is to say ‘Yes’ to everything, which can lead to an over-burdening of the team. While saying ‘No’ to many requests may lead others to perceive the manager in a negative light. Always saying Yes without question and without prioritizing the requests can lead to overworking your team, forcing poor decision-making further down the line.”

Moreover, inexperience in leading people on a personal level can also lead to bad decisions. “A younger manager that manages more mature workers can run into conflict if they do not show the required levels of self-confidence to stick to their decisions and follow them through. If the young manager is not committed to their decisions, they cannot expect their older team members to follow through either.”
Personal Life Pressures

Although it is unprofessional to let your personal life interfere with your professional life, it happens all too often, observed GreatWorkLife.com. “Consider a manager that is going through a painful split with their partner, discovers that a team member has started dating another co-worker. The manager stages an intervention with the two employees and stresses that workplace romances are not acceptable in the company.”

Time Pressure 

The life of a manager is often one of being under constant time pressure. For example:

• You need to deliver a sales number by the end of the month
• You need to present your status report at the senior manager’s weekly team meeting
• You need to stay late to complete your presentations for the next day
• You need to interview ten candidates for an open position
• You need to formulate a detailed business case for investment in a new product or service

“The role of a manager can be exciting and challenging, but the package comes with time pressure,” the report stated. “If your manager is overwhelmed, they may not be able to dedicate enough time to consider important decisions adequately.”

Stress & Overwork

Due to time pressure and overwhelming demands on the team, your manager may well be under stress, GreatWorkLife.com reminded.

“Often decisions made under the conditions of stress and overwork are not good decisions. Many companies now promote a work/life balance. But while they promote it, most management teams do not actually support it. You get promoted by delivering results, not having a good work/life balance. If you, as a manager, can achieve both, you will have a better decision-making track record.”

Senior Leadership Pressure

If you have not been a manager, you may not appreciate that managers are under constant pressure from above, the report pointed out.

“If you have a great manager, they will protect you from external pressures so that you can perform.”

According to GreatWorkLife.com, common senior leadership pressures that lead to poor decision making include:

• Forcing continual cost reductions even though the business is growing
• Enforcing a “Fire the underperforming employees” policy
• Inflating targets to unachievable levels to force an over performance situation
• Pushing a policy of continual workforce downsizing. Even though your company meets its revenue, sales, and profit targets, leadership is still reducing the workforce by 10% per year.
• Constantly reorganizing the company between functional hierarchy (Sales, Product Development, Operations) or business unit hierarchy (Product A, Product B, Product C).

“Most senior leaders do not understand the company well enough to optimize the organizational structures, yet they will constantly reorganize to attempt to prove they are doing something of value,” the analysis stated. “These pressures exert a huge burden on managers, which can lead to poor decision-making.”

Pressure from Individual Team Members

“Some teams have larger-than-life characters that perform important roles and have undue influence within the team,” GreatWorkLife.com pointed out. “ This is a real-life example from my early career. I took a freelance I.T. contract with a large pharmaceutical company. I was 23 years old, and the contract was more money than I could have dreamed of as someone fairly fresh out of university. There was a guy in the team; let’s call him Dave. Dave was a tough lad, physically, mentally, and personally; he did not suffer fools gladly and was crushing if any “Newbie” made a mistake. Even his manager was scared of him. The team was effectively being run by Dave, and it did not help the manager that Dave was also one of the most talented IT guys in the company.

“This placed the manager in an awkward position of deference to Dave’s wishes. If you, as a manager, are in this position of managing a tyrant, you either need to befriend and coach them into better work practices or develop someone to take over their work and let them go.”

No Clear Personal Values

As a manager, you need to have a clearly defined set of personal values; these values will enable you to make better business and team decisions, the report stated, pointing to what it called the FATHER Principles:

Fairness: The principle of fairness is core to the way we humans interact and expect to be treated. By default, we expect to be treated fairly and strive to treat others fairly. As a leader, you should always treat your team, tribe, or followers fairly.

Accountability: Being accountable for bad decisions or mistakes shows your moral fiber. We all make mistakes, but also many of us will not admit our mistakes and move on. Accepting accountability shows you are a strong, well-rounded leader with a character that people will respect and follow.

Trust: Great relationships and great teams are built on trust. Your team, your family, and your friendships rely on trust to grow and develop meaning. All high-performing teams, whether in the military, football teams, or teams within your company, will have a strong foundation when built on trust.

Honesty: Being able to discuss openly and honestly important issues with those around you is key to the integrity of our relationships. Honesty feeds into trust directly. If you cannot be honest with someone, it means you cannot trust them to hear the truth.

Equality: The principle of equality is core to our global human survival and happiness. There are so many inequities in the world, based largely on the fact that people love to discriminate against others for so many reasons.

Respect: The meaning of respect is to show regard for the wishes, feelings, and rights of others. You may not agree with the feelings or wishes of other people, but you need to respect that they have those feelings. You need to be able to appreciate that someone is the way they are for a reason. A true understanding of humanity means you will learn to respect the differences in us all. You may not agree with those differences, but you need to ability to consider why those differences exist.

No Solid Decision-Making Process

To keep it simple, there are two major theories/considerations in ethics that are said to compete, duty and utilitarianism, according to GreatWorkLife.com.

“The duty-based approach establishes right or wrong based on a list of rules such as the biblical rule ‘Thou shalt not kill.’ If you break the rule, you are in breach. Most company codes of conduct are duty-based,” GreatWorkLife.com stated. “The utilitarian approach judges a decision to be right or wrong based on the consequences of ‘the greatest good or the least pain.’”

Ego & Power

The age-old phrase “power corrupts” is as true as it is timeless, GreatWorkLife.com stated.

“While a leader might not have a lot of influence in the world, they certainly wield power over their sub-ordinates. A manager without a solid foundation of meaningful values will start to make poor decisions when they feel they are in a position of power. When a manager exudes the aura of being able to walk on water, it will coincide with poor decision-making.”

Lack of Balance Between Emotion & Logic

“We, humans, are both logical and emotional animals,” the analysis observed. “Yet, in some areas of our life, we let emotion control our decision-making. For example, when it comes to the choice of partner or choices of friends, we are often, if not entirely, driven by emotion. A well-balanced manager should be able to make good logical choices that also sit well with them emotionally. Overly cold and calculating business decision making without consideration for the human aspects and impact of the decision will not be balanced. Moreover, an overly emotional decision that makes no logical sense is equally destructive.”

Why You Might Think A Management Decision Was Bad: Hindsight Bias

:As explained in scientific research into managerial decision making the hindsight bias,” GreatWorkLife.com explained. “This occurs when people look back on their own judgments and those of others. We typically are not very good at recalling or reconstructing the way an uncertain situation appeared to us before finding out the results of the decision. As Max Bazerman puts it: In general, individuals should be judged by the process and logic of their decisions, not just on their results. A decision-maker who makes a high-quality decision that does not work out should be rewarded, not punished. Why? Because results are affected by a variety of factors outside the direct control of the decision-maker. When the hindsight bias leads our knowledge of the result to color our evaluation of the decision maker’s logic, we will make poorer evaluations than we would otherwise.”

 

Letter to Federal Credit Unions (22-FCU-01) Operating Fee Schedule Adjusted for 2022

Letter to Federal Credit Unions (22-FCU-01) Operating Fee Schedule Adjusted for 2022 Dear Boards of Directors and Chief Executive Officers: In December, the NCUA Board unanimously approved a new budget. As a result of that decision and other factors, federal credit union operating fees will decrease by an average of 23.7 percent in 2022. Approximately half of the 2022 operating fee reduction results from the NCUA Board applying a $15 million credit to amounts that would otherwise be due to support the approved 2022 Operating and Capital budgets. The $15 million credit comes from previously collected operating fees that remained unspent at the end of 2021. The remaining reduction to the 2022 operating fee results from a 2021 budget surplus that was used to offset the 2022 budget, growth in reported credit union system assets in 2021, and a slight increase to the share of the Operating Budget funded from the Share Insurance Fund through the Overhead Transfer Rate (OTR) methodology. The enclosed 2022 Operating Fee Schedule will help you calculate the exact amount of your credit union’s 2022 operating fee. The enclosure includes a web link to the NCUA’s online calculator. If your credit union owes an operating fee, it will be due no later than Friday, April 15, 2022. Read the Letter to Federal Credit Unions