National Association of Realtors Q2 2012 Median Sales Summary

On August 9, 2012, the National Association of Realtors (NAR) released their median home sales price indices for metropolitan areas. The NAR saw improvements from Q1 2012 to Q2 2012 in 145 of 149 major metropolitan areas measured. Keep in mind that the first quarter tends to be the weakest for home sales because (a) a lot of houses are covered in snow, and (b) families are closing out the school year and don’t want to relocate. The second and third quarters tend to be the strongest because those factors are not present. Also, the NAR’s Chief Economist Lawrence Yun cites lower inventory in the lower price range accounting for a portion of this increase.

The good news is that year over year changes have been favorable as well. The NAR saw improvements from Q2 2011 to Q2 2012 in 110 of 147 major metropolitan areas measured. Because it’s always fun to talk about the best (and worst) performers, below are some of the statistics from the data:

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Sample Troubled Debt Restructuring Policy

The NCUA now requires that credit union’s have a policy governing their Troubled Debt Restructuring processes. They will begin reviewing these policies during exams in the fourth quarter of this year. With Q2 coming to a close, it is something you should at least start thinking about thinking about.

I put together a draft of what I would expect the policy to look like both in terms of what should be included to make the NCUA examiners happy (limitations on TDRs to members and characteristics that would qualify the member to receive a restructuring) and also what information should be included to help your staff identify and deal with a TDR.

I would warn against doing a find and replace, changing “The Credit Union” to the name of your credit union, printing it out and storing it away into a file. If there is documentation the sample is recommending that your credit union won’t be able to track or store efficiently, be sure to remove that requirement from the policy!

The sample is below for your viewing pleasure:

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Twenty Twenty Upcoming Conference Schedule: Come See Us!

If you are currently at the MDDCCUA Annual Conference in Ocean City, stop by our booth! Over the next week we will be at a couple of other conferences. If you’re attending, stop by and say hi!

From June 13th to June 16th, come see us at the LSCU Annual Conference in Orlando, FL.

From June 17th to June 20th, come see us at the America’s Credit Union Conference in San Diego, CA.

We hope to see you there. Travel Safely!

-Dan Price, CPA
Twenty Twenty Blogger

NCUA Finalizes Policy on Troubled Debt Restructurings

Yesterday the NCUA Board met and finalized a new policy regarding Troubled Debt Restructurings. The purpose of the policy is largely to reduce the burden faced by credit unions in tracking these loans. It appears the final verbiage is set to be added to the federal register sometime next week, but in the meantime The NCUA has issued a press release summarizing the major changes.

We reviewed the initial policy during its comment period. If you aren’t familiar with the proposed changes you can read about them here.

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Concentration Risk Policies and Concentration Risk Assessment

With concentration risk policies at the forefront of NCUA Examiner focus and relatively little specific guidance on drafting your policies, credit unions are taking some interesting approaches in determining their concentration thresholds. There are some consistencies among credit unions, such as setting thresholds as a percentage of net worth or total assets, but the disaggregation of loan products and percentage thresholds are more varied. The question is, why?

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Loan Zone: Portfolio Risk Analysis

Brad Stewart, Enterprise Risk Manager for IBM Southeast Employees’ Federal Credit Union, Twenty Twenty Analytics client and faithful Twenty Twenty Blog reader, was published in Credit Union Management Magazine. His article, “Loan Zone: Portfolio Risk Analysis” discusses the challenges credit unions face in analyzing the risk of their loan portfolios and the benefits of doing so. Brad also has some kind words for the Twenty Twenty Analytics Team and our Risk Model. Thanks Brad!

A couple of excerpts from his article:

Many credit unions understand the need to identify and quantify risks within their loan portfolios, but such scarce resources as time, staffing or expertise can derail the process before it even begins. Executed properly, a risk analysis on your loan portfolio can have significant benefits and, with the right guidance, this seemingly insurmountable task can be achieved. Although hiring help is not always the answer, in our case, it was exactly what we needed.

Overall, the loan portfolio risk analysis from Twenty Twenty empowered us to not only find the answers we were looking for, but to identify new insights and opportunities that might have otherwise gone unnoticed.

If the last few years have taught us anything, it’s that we need better systems in place to understand, evaluate and act on risk. An effective risk analysis on your loan portfolio should not only help you understand your risks, but allow you to proactively make decisions and set strategies that improve your credit union’s financial health and performance.

-Dan Price, CPA
Twenty Twenty Blogger

Tackling TDR Torment

A lot of you have been anxiously awaiting an update on the NCUA’s call for comments on changes to 12 CFR Part 741 “Loan Workouts and Nonaccrual Policy, and Regulatory Reporting of Troubled Debt Restructured Loans.” Unfortunately, they’re not final yet, which means you will more than likely be preparing your 3/31/2012 Call Report the same way you always have.

In the meantime, I wanted to go over some specific examples of situations credit unions have had and go through the steps in determining whether they constitute a troubled debt restructuring. For the purposes of these examples, I will be assessing the status of the loan using the GAAP definition, which is currently in the process of being adopted by the NCUA, but not yet adopted.

To recap, a TDR is a modified loan in which there is financial difficulty on behalf of the debtor and a concession has been granted by the financial institution which it would not have considered but for the borrower’s financial difficulty. Let’s go over how that applies to some specific situations.

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Twenty Twenty Analytics Teams With CUNA Strategic Services, Inc. (CSS)

Twenty Twenty Analytics has formed an alliance with CUNA Strategic Services, Inc. (CSS).

Excerpts from the press release announcing the alliance:

“Twenty Twenty Analytics’ strength is derived from the fact it works exclusively with credit unions,” said Wes Millar, CSS senior vice president. “Additionally, the company has experience working face-to-face with examiners, helping credit unions successfully navigate challenging exams.”

CSS “has a proven track record of staying in the forefront of credit union needs, and we could not ask for a better business relationship in this dynamic environment,” said Steve Miller, director of operations for Twenty Twenty Analytics.

To read the press release in full, visit CUNA News Now.

Click here to visit Twenty Twenty’s CSS Page.

-Dan Price, CPA
Twenty Twenty Analytics Blogger

Twenty Twenty Analytics to Present on Troubled Debt Restructurings

This Friday, March 16th at 2:00pm Central Time, Twenty Twenty Analytics is teaming up with CUNA’s Center for Professional Development to provide a Webinar on Troubled Debt Restructurings.

During this webinar, you will learn about the following topics: