Recent Final Rule Analyses - Temporary Increase in SMSIA; Restructuring of Federal Reserve's Check Processing Operations; Revised Fee Schedules

CUNA
November 11, 2009 | COMMENTS

Final Rule Analysis: Temporary Increase in SMSIA; Display of Official Sign; Coverage for Mortgage Servicing Accounts

The rule amends NCUA's share insurance regulations to reflect the extended temporary increase--through December 31, 2013--of the standard maximum share insurance amount (SMSIA) from $100,000 to $250,000.

The rule also finalizes changes made by an interim final rule issued in October 2008 with regard to increased coverage for mortgage servicing accounts and display of NCUA's official sign.

The final rule will be effective as of November 30, 2009.

If you have any questions regarding this final rule, please contact Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.com or (800) 356-9655, extension 6736, or contact Regulatory Counsel Luke Martone at lmartone@cuna.com or extension 6743. Click here to access the final rule.

Official Sign

The October 2008 interim final rule amended the regulations regarding display of NCUA's official sign to reflect the temporary increase in the SMSIA. The interim final rule provides insured credit unions the following options with regard to the extent changes need to be made to the official sign to reflect the increase:

• Continue to display the current official sign, reflecting the $100,000 limit, without penalty;
• Display any other version of the official sign distributed or approved by NCUA that reflects the increase; or
• Alter the current sign to reflect the temporary increase, by hand or otherwise, as long as it remains legible. This could be done by placing a sticker that reads “$250,000” over the portion of the current sign that reads “$100,000.”
• Credit unions that do not alter the current signs should post additional signs in their lobbies or place a notice on their websites.

The final rule adopts the amendments made by the interim final rule without change other than to reflect the extension of the increased SMSIA through December 31, 2013.

Mortgage Servicing Accounts (formerly custodial loan accounts)

The October 2008 interim final rule expanded share insurance coverage for mortgage servicing accounts by insuring the principal and interest portion of a mortgagor's payment separately from his or her individual accounts. Prior to the interim final rule these accounts were combined with the borrower's other accounts at the credit union for purposes of share insurance coverage. The taxes and insurance portion of these payments continue to be combined with the borrower's other accounts at the credit union for share insurance purposes.

The final rule adopts the interim final without change.

If you have any questions regarding this final rule, please contact Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.com or (800) 356-9655, extension 6736, or Regulatory Counsel Luke Martone at lmartone@cuna.com or extension 6743. Click here for the final rule.

Restructuring of Federal Reserve's Check Processing Operations in District 3

The Federal Reserve Board issued a final rule amending appendix A of Regulation CC to restructure the Fed's check processing operations.

These changes reflect the restructuring of check-processing operations within the Federal Reserve System.

As a result of these changes, some checks drawn on and deposited at financial institutions located in Philadelphia that are currently classified as “non-local” will become “local” checks and subject to shorter permissible hold periods.

The amendments are effective as of December 12, 2009.

If you have any questions regarding this final rule, please contact Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.com or (800) 356-9655, extension 6736, or contact Regulatory Counsel Luke Martone at lmartone@cuna.com or extension 6743. Click here to access the final rule.

DISCUSSION

Regulation CC provides maximum hold-periods for checks between the time a deposit is received and the time those funds are available for withdrawal. Generally, funds that are deposited by a local check must be available sooner than funds deposited by a non-local check. A check is considered local if it is payable by a financial institution located in the same Federal Reserve check-processing district as it was deposited.

Appendix A to Regulation CC contains a routing number guide to assist financial institutions in identifying local and non-local checks. This guide helps determine the maximum hold-period by listing each of the Federal Reserve Bank's check processing offices and the routing symbol of each financial institution it serves. Financial institutions in the same check processing office are considered local to one another.

In its ongoing consolidation effort, the Federal Reserve is further reducing the number of locations at which it processes checks, and all checks will be processed at the Cleveland Reserve Bank by early next year. A final rule has been issued amending appendix A of Regulation CC to restructure its check-processing operations in Philadelphia, located in the Third Federal Reserve District.

The head office of the Reserve Bank of Philadelphia will stop processing checks on December 12, 2009. As of that date, credit unions currently served by the Philadelphia office for check-processing purposes will be reassigned to the head office of the Cleveland Reserve Bank, located in the Fourth Federal Reserve District.

Once the amendments are implemented, some checks deposited in the Third Federal Reserve District that are currently non-local will become local checks and subject to shorter permissible hold periods. Credit unions that are affected may need to amend their availability schedules and related disclosures and provide their members with notice of these changes.

Revised Fee Schedules for Federal Reserve Bank Payment Services

The Federal Reserve Board (Fed) recently approved a revised fee schedule for Federal Reserve Bank (Reserve Bank) payment services.

The Reserve Banks will increase most paper and electronic check services fees, as well as the monthly FedACH settlement fee. The Fedwire securities services fees will remain unchanged.

The Fed also approved the 2010 private-sector adjustment factor (PSAF) for Reserve Bank priced services at $50.2 million. The PSAF is an allowance for taxes and other imputed expenses that would have to be paid and profits that would be earned if the Reserve Bank's priced services were provided by a private business. The Monetary Control Act of 1980 requires the Fed to establish fees to recover the costs of providing these services, including the PSAF, in order to promote competition between the Reserve Banks and private sector providers.

Fee schedules for all priced services are available on the Reserve Banks' financial services web site at www.frbservices.org .

The new fee schedules and earnings credit rate are effective as of January 4, 2010.

> Read the full final rule analysis at cuna.org here