By The Way
The By The Way newsletter is a great way to keep Kentucky credit unions informed of the latest updates in governmental affairs, compliance and regulations, education and training. In addition, By the Way highlights the difference credit unions are making on a daily basis.
Credit Union News
On Tuesday, June 20th, Garth Griese, CEO/Service One Credit Union had the opportunity to attend a legislative briefing hosted by Rep. Jim DeCesare and Sen. Mike Wilson held at Mariah’s located in Bowling Green, KY.
Although the briefing was to highlight the legislative accomplishments from the 2017 General Assembly, Mr. Griese had the opportunity to meet with both elected officials and discuss credit union issues.
Sen. Paul invited several organizations to join him during a press conference in Louisville on Thursday, July 6th to discuss his ideas for expanding Association Health Plans and reforming the current laws governing group insurance. Several representatives from these Kentucky organizations spoke about the benefits of Association Health Plans. From the chambers of commerce to credit unions, the farm bureaus to fast food franchisees, there are millions of Kentuckians who could be eligible to join such groups if the laws and regulations were changed. Wendell Lyons, President/Kentucky Credit Union League, Lynn Huether, CEO/ClassAct FCU and Jim Spradlin, CEO/Park Community CU were in attendance.
Congratulations to Ashley Bean (Class Act Federal CU) and Candace Fyffe-Stanley (Ashland CU)!
Ashley and Candace, along with two other group members, were also awarded Best 3rd Year Whitepaper.
“I am grateful for the opportunity to attend CUNA Management School. Through the completion of the three year program I have a better understanding of the operations of a credit union overall. I also understand more about the history of my financial institution, and how to look at financial ratios. In addition to the educational opportunities, I was able to establish friendships with other credit unions professionals that I hope will last a lifetime.” – Ashley Bean
"The opportunity to attend CUNA Management School was a true honor for me. I came from a diverse professional background, probably much different than most in our industry. With this experience, I have gainedmore refined leadership skills, an in-depth understanding of daily operations, and a real grasp of what the future holds for us as an industry. Throughout my three years, the one thing that remained constant was leaders in the class that rose up and stood out year after year, offering great insight, advice, and thoughts about how to make our credit unions better. I will forever remember those faces and friends." - Candace Fyffe-Stanley
For more than 45 years, the SRCUS Southeast CUNA Management School has equipped graduates with the skills and knowledge to meet the leadership challenges that arise in the credit union industry. The curriculum develops students’ operational, managerial and leadership abilities as they receive advanced academic instruction on a variety of topics including management, leadership, and financial analysis. Students also apply the knowledge gained from the on-site sessions to projects that require strategic analysis of their credit unions and research of relevant issues facing the credit union industry.
In addition to a rigorous academic curriculum, the Southeast CUNA Management School provides students the opportunity to develop their leadership capabilities and better understand the credit union philosophy so that they can contribute to the success of their credit unions and to the movement as a whole. In the true credit union spirit of “people helping people”, the Class of 2017 participated in a volunteer outreach effort with the Food Bank of Northeast Georgia, where they assisted with food recovery for families in need in Northeast Georgia.
Graduation from the Southeast CUNA Management School is recognized throughout the credit union industry as a prestigious mark of achievement. Upon successful completion of the program, students received a graduation diploma issued in conjunction with the University of Georgia Center for Continuing Education. For more information on the Southeast CUNA Management School, visit www.srcus.org/management.
Top row Left to Right: Alan, Ashley, Lindsay, Candace
Kentucky Class of 2018 (2nd Year Students)
- Alan Parrot, Members Choice CU
- Kathy Roberts, Commonwealth CU
Kentucky Class of 2019 (1st Year Students)
- Lindsay Cottner, Jefferson County Federal CU
- Stephanie Peavler, Commonwealth CU
Not all learning at the Southeast CUNA Management School takes place in the classroom, and students recently participated in a variety of outdoor challenge activities designed to promote teamwork, self-confidence, leadership, and the expansion of their problem solving abilities.
Second-year students took to the “high ropes” course at the UGA Challenge Course and navigated their teams through elements comprised of cables, logs and ropes, building courage and confidence throughout the day as the challenges increased in complexity. First-year students participated in the “low ropes” challenges where they used critical thinking skills and teamwork to navigate complex challenges and solve problems, with the concluding activity consisting of getting students over a 12-foot wall without the use of stairs, ladders, ropes, or other assistance.
“I cannot even put into words the last 9-10 days at SRCUS. The fact that I work for a company who allows me to take time to develop myself as a leader and supports me is amazing,” said Kathy Roberts of Commonwealth Credit Union. “I can't express the gratitude I have for this incredible experience! The knowledge I gained from Project Management, Asset Liability Management, Fraud Prevention, Marketing Management, and much more was great! The networking with fellow Credit Union employees across the country was priceless. These individuals I treasure and will become lifelong friends with.”
The Southeast CUNA Management School is a three-year program for credit union leaders. The program is sponsored by the Southeast Regional Credit Union Schools (SRCUS), and over the course of the program, students participate in lectures and class exercises covering a variety of topics including business development and communication, risk management, strategic planning, financial analysis, and leadership. Successful completion requires that students participate in courses on campus over a three-year period, development a comprehensive project, and writing and presenting a whitepaper on a relevant industry topic. Graduates of the Southeast CUNA Management School consistently continue on to top leadership positions in the credit union industry.
It’s Time for the Kentucky Recognition Award Nominations!
Each year, your League hosts an Awards Banquet to recognize the achievements of individuals, credit unions, and chapters who have made an impact in the credit union movement. Although it is still early, we are now accepting nominations for the following categories:
Steve Brody Outstanding Volunteer Award
The purpose of the Steve Brody Outstanding Volunteer Award is to recognize the outstanding accomplishments, time and effort in support and promotion of the credit union idea put forth by volunteers in the Commonwealth of Kentucky.
Frank Moore Outstanding Professional Award
The purpose of the Frank Moore Outstanding Professional Award is to recognize the outstanding accomplishments, time and effort in support and promotion of the credit union idea put forth by the credit union professionals in the Commonwealth of Kentucky.
Richard Zimmerman Outstanding Young Credit Union Leader Memorial Award
The Richard Zimmerman Outstanding Young Credit Union Leader Memorial Award is presented to recognize the accomplishments of young people who have made significant contributions to the support and promotion of the credit union idea.
Wayne R. Woodward Philosophy in Action Award
The Wayne R. Woodward Philosophy in Action Award was established to recognize an individual, group of individuals, or organization that by act or deed, above and beyond the norm, personifies the credit union philosophy of "People Helping People."
For further information on these categories, and to submit a nomination, please click HERE.
CUNA Councils “All In” Campaign Returns for 2017
Does your credit union need to add members to become ALL IN?
When your credit union is, or becomes, ALL IN by August 18, 2017, the credit union not only earns a chance to win an incredible prize package, but will reap the benefits of having a leadership team that is fully tapped into all of the networking and education resources the Councils offers.
Click the picture below to join a Council:
*Applies to credit unions with assets of more than $50 million. Dues for credit unions under $50 million are $95.
When your credit union goes ALL IN by joining all 7 CUNA Councils, you'll save on 2017 membership and entered to win an incredible prize package.
How Does This Work?
2. Credit unions with at least one member in all seven Councils will be entered to win a CUNA Grand Prize Pack.
The Grand CUNA Prize Pack, which includes:
Up to $10,000 towards the credit union’s 2018 Credit Union National Association dues.
Choose one of the following experiences:
- Experience Choice #1: CUNA President & CEO Jim Nussle in person at the winning credit union to discuss the credit union industry, the campaign for Common Sense Regulation, and/or leadership
- Experience Choice #2: CUNA Chief Transformation Officer Mollie Bell in person at the winning credit union to conduct her leadership workshop
- Experience Choice #3: A member of CUNA staff (depending on the credit union’s focus) to conduct an onsite strategic planning session with the credit union’s exec team and/or Board based on the 2017 E-Scan (includes an E-Scan package)
The total value of the package is up to $14,500.
3. Tweet a group picture or video using #ALLInCouncils featuring your credit unions’ CUNA Council members. Briefly share why your credit union is All In with CUNA Councils and we’ll make a donation to the National Credit Union Foundation.
Share Your Video/Photo
The CUNA Councils want to celebrate your credit union’s commitment to professional development and pay it forward. No matter how many CUNA Council members your credit union has, we want to see your smiling faces!
1) Whether you have one Council member or twenty - Snap a photo or take a short video to share why your credit union is All In with Councils. Are your Council members in various locations? Get creative with Photoshop!”
2) Pay it Forward to the National Credit Union Foundation! Submit a Group Selfie or Video of your credit union's Council members and we'll make a donation of $25.00 for each original photo or $100.00 for each original video (up to $5000 total) shared on Twitter using the hashtag #ALLINcouncils.
3) (Optional) Download and Print an ALL In banner for your selfie:
For more information, click here.
JULY 18, 2017
Kentucky Credit Union League
3615 Newburg Road
Louisville, KY 40218
EDUCATIONAL INVESTMENT: $239
(Includes program materials, breaks, lunch and refreshments.)
Collections and bankruptcy training continues to be one of those areas where training really pays off for credit unions. Knowing what you are doing can easily help your credit union recover thousands of dollars each year that might otherwise be lost. Not knowing what you are doing can lead to mistakes that bring lawsuits and complaints to regulators. Keeping collectors well-informed isn't just a legal duty---it makes financial sense.
Credit union attorney Eric North has worked with the Kentucky Credit Union League, CUNA and other state leagues for more than 25 years to help credit unions understand, comply with, and obtain the most benefit from the laws that govern them.
Join us on July 18, as he returns to talk with Kentucky credit unions about topics including ...
|COLLECTIONS ISSUES||BANKRUPTCY ISSUES|
There will also be an Open Forum on collections and bankruptcy issues.
Have other collections or bankruptcy issues you would like covered?
A block of rooms has been held at the Holiday Inn Express, 1921 Bishop Lane , Louisville, KY 40218. For reservations, call the hotel at 502.456.4411 and let them know you are with the Kentucky Credit Union League group.
Business casual. Be sure to bring a sweater or jacket, as personal comfort levels vary.
Refunds will be issued until five days prior to the event date less a $50 administration fee per person. Substitutions accepted at any time.
*Scholarships are available.
July 25-26, 2017
Kentucky Credit Union League Office
3615 Newburg Road
Louisville, KY 40218
Educational Investment: $379
REGISTRATION DEADLINE IS JULY 11th.
This program is limited to 25 participants so register now!
WHAT IF ...
Empower lenders through a hands-on learning experience that provides unique, customized, real lending solutions for the real world.
ULEND Academy builds lenders' skills in a 2-Day Workshop to provide an exceptional member experience for today and into the future.
DAY 1: 8:30 a.m. - 4:30 p.m.
DAY 2: 8:30 a.m. - 4:30 p.m.
Plan & Prep
Structure the Loan
Present the Right Solution
Close with Purpose
Are you ready to empower your lenders to
A block of rooms has been held at the Holiday Inn Express, 1921 Bishop Lane , Louisville, KY 40218. For reservations, call the hotel at 502.456.4411 and let them know you are with the Kentucky Credit Union League group.
This program was created especially for you by:
2017 Volunteer Leaders Conference
August 11-13, 2017
Dollywood's DreamMore Resort
2525 DreamMore Way
Pigeon Forge, TN 37863
As a volunteer, no one is better positioned to affect the future of your credit union than you are. You have accepted a major responsibility in guiding your credit union. Ongoing education is important to reach the next level of challenge and opportunity.
Session Topics & Speakers:
- The Current Economy: More Like the Old Economy than you Think – Elliot Eisenberg, Chief Economist for GraphsandLaughs
- This Thing Called Relevance: Critical Insights for a Quickly Changing Marketplace – Josh Allison, Senior Consultant for FI-Strategies, LLC
- Board Strategies for Higher-Yielding Investments to Offset the Cost of Employee Benefits – Eric Earle, Executive Benefits Advisor for CUNA Mutual Group
- Becoming a Servant Leader – Janice Branch, Senior Training Consultant for InterAction Training
- Living Your Legacy – Crystal Jonas, founder and CEO of Tap Your Genius, Inc.
2017 East Coast Marketing Conference
September 20-22, 2017 | Wilmington, NC
The 2017 East Coast Marketing Conference, hosted by the Carolinas Credit Union League in partnership with the Virginia Credit Union League, will be Sept. 20-22, in the Riverfront District of Wilmington, NC at the Hilton Wilmington Riverside. This conference will focus on emerging and high-value topics with an agenda created by and for credit union marketing and business development professionals, plus opportunities for networking and idea sharing with credit union peers and exhibitors.
The conference agenda is designed by marketers and business development professionals from diverse credit unions. This year, you will focus on:
- Digital marketing strategy
- Kicking up creativity
- Growing wallet share
- Deciphering data to create incredible member journeys
- Tools and tactics for relevance in a crowded news environment
- Strategy, marketing, and growth planning
Participant cost of $325 per person includes sessions, materials, refreshment breaks, reception, and Thursday evening activity.
Hilton Wilmington Riverside
301 N. Water Street
Wilmington, NC 28401
The room rate for this conference is $155 per night. Please call 910-763-5900 and provide group code "CCR" to make your reservation or click here to reserve your room online. The deadline for reservations is Saturday, August 19. Rooms may sell out prior to the deadline, so reserve yours early.
By: Elliot Eisenberg
Although GDP growth slowed again in Q1, as has been the case for the past few years, the economic recovery that began in July 2009 remains intact. The poor performance of the US economy from January through March was almost expected as Q1 growth has been consistently weak in recent years, with the incoming employment, manufacturing, and service sector data all pointing to a modest economic pickup. GDP growth the rest of the year should average 2.50%, with growth in Q2 above 3.00% as the economy rebounds from a tough Q1. The combination of continued employment growth and an improving global economy suggest that 2017 will probably improve as it progresses.
So far, 2017’s biggest surprise has been the very limited progress the Republicans have made on their legislative agenda, which includes increased defense spending, the repeal of Obamacare, tax reform, deregulation, increased infrastructure spending and more. Had some of these proposals already become law, the economy would be growing somewhat faster than it is. And, it is quite possible that by year’s end President Trump will sign some of his agenda into law. That said, outside of agriculture which is very weak, mining which is struggling, and auto sales which are high but slowing, the rest of the economy is OK. The labor market continues to strengthen, and job creation, while down slightly from last year, remains surprisingly strong. At this rate, there will be little if any slack in the labor market 12 months from now.
As for housing, after a strong 2016, it is slowing, albeit slightly. Looking first at existing homes, a lack of inventory is severely constraining sales. Simply put, there are not enough homes for sale. Despite that, existing home sales should rise by 3% this year while home prices should rise by a strong 6% nationally, with house price appreciation of closer to 10% in the West. New home construction activity should rise by about 5.5% in 2017, with single family activity rising by 8%, and multifamily starts remaining unchanged. Ideally, starts would rise by much more, and in the process put downward pressure on house price appreciation. However, rising labor and input costs, increasingly strict building codes, aging-in-place, and most importantly, restrictive local land use policies, make building entry-level houses virtually impossible. As a result, new homes are relatively expensive and activity is subdued.
Looking at inflation, it remains benign and has been declining the last several months but should rise slightly as the year progresses. Oil prices are very much range-bound between $45/bbl and $55/bbl because of both OPEC and US fracking activity, and are, as a result, unlikely to add to inflation. While the unemployment rate continues to fall, and labor shortages become increasingly widespread, wage growth also remains subdued. These weak inflationary pressures are giving the Fed the ability to raise rates more slowly than would normally be the case. This, in turn, is causing the dollar to weaken, which should boost exports. Given this weak inflationary environment, expect the Fed to raise rates by one-quarter-of-one-percent this month and by an equal amount in September or December. Long-term rates bottomed late last year and 10-yr treasuries will end the year at about 2.45% as the economy modestly strengthens.
In short, the economy continues to grow slowly. Short-term interest rates are likely to continue to rise gradually, and residential construction activity looks to continue to strengthen sluggishly. Most critically, continued job creation will keep consumer spending up, passage of key Republican legislation could boost growth late in the year, and the likelihood of a recession during the next six months is close to zero.
Have a wonderful summer and see you in August!
Commonwealth CU held a successful Community Car Sale event at the Louisville Road Branch in Frankfort on June 9th and 10th. Highlighting this unique event was the $10,000-giveaway, the winner of which was announced “live” on Facebook by President and CEO Karen Harbin on June 16th.
This event featured a great selection of inventory from the four participating dealerships in Frankfort, as well as, lowered vehicle rates. Taylor Belle’s ice cream truck and the Franklin County FFA provided the refreshments during the sale.
Four outstanding high school graduates were recently named Commonwealth CU’s 2017 scholarship awardees.
Blake Borwig of Anderson County High School (Lawrenceburg), Emma Cravens of Southwestern High School (Somerset), Josiah Henson of Jackson City High School (Jackson), and Tamara Rudic of Western Hills High School (Frankfort) each received $1,000—besting 50 other contenders.
To qualify, an applicant must be a member of Commonwealth CU for at least one year, must have a GPA of 2.8 or higher, and must present a college acceptance letter.
Commonwealth CU was recognized by the Kentucky State University (KSU) in Frankfort as the first financial institution to respond to its call for community support during a leadership luncheon the university co-sponsored with the Frankfort Kiwanis Club on May 18th.
As part of this new partnership, the credit union’s Cadylee Coffey of Business Development conducted a financial literacy course at the GearUp Kentucky Summer Academy at KSU in June. GearUp Kentucky is a three-week residential summer enrichment program for qualified 11th, 12th or graduating seniors—aimed at helping students develop skills needed for college and career success. A total of 60 students were enrolled in the program at the KSU campus.
The financial literacy course for program participants covered the basics of personal finance, such as creating a budget on a fixed income; and learning the advantages and disadvantages of checking and savings account products. Ms. Coffey also lectured on the difference between credit unions and banks, and introduced identity theft and fraud scams aimed at college students.
Fort Knox Federal Credit Union awarded college scholarships to four outstanding 2017 high school graduates. Receiving the one-time $1,000 awards are: Seth Paul Newby, LaRue County High School; Brooke Lee Mahanna, North Hardin High; Ramsey Deaton, Elizabethtown High School; and, Rebecca Jeffries, Lincoln County High School in Stanford, KY.
Each year, Fort Knox Federal provides $1,000 in financial assistance to a select number of deserving college-bound high school students who are members or are the sons or daughters of members of Fort Knox Federal Credit Union. The scholarships are designated the Howard Roush Memorial Scholarships, in honor of a former Fort Knox Federal president.
To qualify for consideration, applicants must be a high school senior or graduate; a member in good standing with Fort Knox Federal; confirmed to attend a college or vocational/technical institute within one year of graduation; and, have a demonstrated records of academic achievements, community service and extracurricular activities.
Applicants are evaluated on their overall high school grade point average and financial need based on overall family income, lack of other financial assistance and other siblings in college. Sharing financial need information is strictly on a voluntary basis and applicants not providing this information are not penalized during consideration.
“The Roush Scholarships directly supports Fort Knox Federal’s mission of improving the financial quality of our members’ lives. We are pleased to help these deserving students continue their education,” said Ray Springsteen, Fort Knox Federal President and CEO.
This year’s scholarship recipients will pursue their college studies at, Western Kentucky University, Eastern Kentucky University and Campbellsville University.
If you have visited CUNA's MAPR calculators recently, you might have noticed a few changes. CUNA currently offers a Closed-End Loan calculator with a Known Monthly Payment and an Open-End Loan calculator.
The Closed-End Calculator requires a credit union to input the monthly payment calculated by the credit union's system. The monthly payment should already include any fees, charges, or premiums for credit insurance, debt suspension agreements and similar products, so a credit union will not be required to enter those amounts separately.
Formerly, you were required to click on a button stating you agreed to the legal terms and then you were required to click on either the open-end or the closed-end calculator in order to actually access the desired calculator.
Now, you can access the calculators quicker by clicking on a button that states: I agree to these terms. Please take me to the MAPR Calculator for Closed-end Loans with Known Monthly Payment, or by clicking on a button that states: I agree to these terms. Please take me to the MAPR calculator for Open-End Loans.
The calculators will permit a credit union to make a manual determination of the MAPR and will indicate when a combination of interest, fees and charges exceed 36%.
The calculators will be maintained in the following locations on CUNA's website:
- Under the Resources tab for the Military Lending Act topic in CUNA's eGuide—click here,
- In the Resources listing from the Compliance dropdown box on CUNA's Home page---click here, and
- In CUNA's Compliance Community under, in the Compliance Resources dropdown box---click here.
A credit union should contact KJE Computer Solutions, LLC. if it is interested in maintaining MAPR calculators on its website that could be used to interface with its core processor or statement provider.
Finally, as you know, the Department of Defense's July 2015 amendments to the Military Lending Act became effective for most open-end and closed-end loans (except credit card accounts and loans that were specifically exempted from the MLA rule) on October 3, 2016. Credit Card Accounts will be covered by the MLA rule beginning on October 3, 2017 unless delayed further by the DoD.
The Office of Foreign Assets Control (OFAC) has posted new frequently asked questions (FAQs) to address their announcement of changes to United States policy toward Cuba. The new policy channels commercial activities away from the Cuban military; tightens travel restrictions on U.S. tourism to Cuba; and reaffirms the U.S. statutory embargo of Cuba.
The policy memorandum directs the Treasury and Commerce Departments to begin the process of issuing new regulations within 30 days. The policy changes will not take effect until those Departments have finalized their new regulations, a process that may take several months.
OFAC's FAQs provide additional detail on the impact of the policy changes on U.S. travelers and businesses. Of interest to credit unions, the announced policy changes will not change the authorizations for sending remittances to Cuba. The announced changes also include an exception that will allow for transactions incidental to the sending, processing, and receipt of authorized remittances to the extent they would otherwise be restricted by the new policy limiting transactions with certain identified Cuban military, intelligence, or security services. As a result, the restrictions on certain transactions in the new Cuba policy will not limit the ability to send or receive authorized remittances. (See FAQ #8) In addition, the forthcoming regulations will be prospective and will not affect existing contracts and OFAC licenses. (See FAQ #10)
For more information:
- Click here for the FAQs.
- Click here for the White House Fact Sheet on the new Cuba policy.
- Click here for the National Security Presidential Memorandum on Strengthening the Policy of the United States toward Cuba (issued on June 16, 2017).
The CFPB is seeking comment on proposed amendments to the agency's 2016 prepaid accounts rule. The rule, which established "comprehensive protections" for prepaid accounts under Regulation E and Regulation Z, is currently scheduled to go into effect next April. Comments on the proposed changes will be due 45 days after the proposal is published in the Federal Register.
The proposal would:
- Revise the prepaid rule's error resolution and limited liability provisions under Reg E. Financial institutions would not be required to resolve errors or limit consumers' liability on unverified prepaid accounts. However, for accounts where the consumer's identity is later verified, financial institutions would be required to limit liability and resolve errors with regard to disputed transactions that occurred prior to verification, consistent with the timing requirements of the prepaid rule.
- Create a limited exception to the prepaid rule's credit-related provisions under Reg Z for certain business arrangements between prepaid account issuers and credit card issuers that offer traditional credit card products. This exception is intended to address certain complications in applying the credit provisions of the prepaid rule to credit card accounts linked to digital wallets that can store funds where the credit card accounts are already subject to Reg Z's open-end credit card rules in circumstances that appear to pose lower risks to consumers.
- Make clarifications or minor adjustments to the rule's provisions regarding: an exclusion from the definition of prepaid account, unsolicited issuance of access devices, several aspects of the rule's pre-acquisition disclosure requirements, and submission of prepaid account agreements to the CFPB.
- In April 2017, the CFPB delayed the general effective date of the prepaid rule by six months, to April 1, 2018. In this current proposal, the CFPB is requesting comment on whether a further delay would be necessary and whether industry needs an express provision addressing early compliance with the rule.
- The CFPB also released an updated version of its small entity compliance guide for the prepaid rule. That update reflects the recent effective date delay and clarifications on several other issues raised by industry feedback. The revised guide is available here.
More information about the Bureau's prepaid rule is available at www.consumerfinance.gov/prepaid-rule/.
Let’s discuss a credit union's available options for handing escrow account shortages and deficiencies under the Real Estate Settlement and Procedures Act (RESPA). An escrow shortage or deficiency occurs when there is not enough money in the escrow account to cover the monthly payment. This can happen for a variety of reasons, but one of the most common reasons is an increase in property taxes, usually the result of the borrower's property assessment going up. So what should a credit union do when an increased tax or insurance bill comes in and the account does not have sufficient funds to cover the payment?
Before the credit union or servicer can seek repayment from the member, the servicer needs to conduct an escrow analysis to determine the extent of the shortage or deficiency. Note that a shortage is different than a deficiency under RESPA. A shortage is the amount by which a current escrow account balance falls short of the target balance at the time of escrow analysis, whereas a deficiency is the amount of a negative balance in an escrow account. The credit union's options for repayment will then depend on whether the amount of the shortage or deficiency is less than the amount of one month's escrow account payment. If it is less than one month's escrow payment, the credit union has three options: (1) allow the shortage or deficiency to exist and do nothing to change it; (2) require the borrower to repay the shortage or deficiency amount within 30 days; or (3) require the borrower to repay the shortage or deficiency amount in equal monthly payments over at least a 12-month period.
If an escrow account analysis discloses a shortage or deficiency that is greater than or equal to one month's escrow account payment, the rule provides two the servicer with two options: (1) allow the shortage or deficiency to exist and do nothing to change it or (2) in the case of a shortage, require the borrower to repay the shortage in equal monthly payments over at least a 12-month period; in the case of a deficiency, require the borrower to repay the deficiency in two or more equal monthly payments. The servicer should also notify the borrower at least once during the escrow account computation year if there is a shortage or deficiency in the escrow account. The notice may be part of the annual escrow account statement or it may be a separate document.
Although RESPA provides several options for servicers to seek repayment for a shortage or deficiency, the best practice for credit unions is to ensure that you are monitoring the escrow account closely and anticipating potential changes on the front-end to prevent the account from falling below the target balance.