Hurricanes Katrina and Rita

What are others doing to assist credit unions affected by Hurricane Katrina?

Freddie Mac (Freddie Mac News Release, 9/8/05) instructed its mortgage servicers that may exercise the following options:

• Help cash-strapped victims of Katrina by returning September mortgage payments that were already made by borrowers but not yet reported to Freddie. Alternatively, borrowers may contact their servicers to request the return of their September payments. Borrowers will be required to make all mortgage payments once the temporary suspension period ends.
• Suspend for three months mortgage collections (September, October, and November) in the disaster areas designated by FEMA. Following that three-month suspension, servicers may decide whether to continue allowing postponement of payments or to allow reduced payments on Freddie Mac-owned mortgages for an additional 9 months on a case-by-case basis. Servicers must make their determinations before the mortgage’s December payment due date
• Not report to credit bureaus reversed or suspended payments that resulted from Katrina and to suspend all late fees, collections and foreclosure activities in the storm-affected areas during the 3-month suspension period.
• Not to advance interest on any Freddie Mac mortgage granted forbearance under the company’s special Hurricane Katrina policies.

Fannie Mae (8/31/05 Fannie Mae News Release):

For information on mortgage relief, homeowners that experience a hardship should contact the lender to whom they send their monthly mortgage payment.

Consumer Resource Center – 1-800-732-6643

• Through Fannie Mae’s disaster relief provisions, lenders help borrowers in several ways, including suspending mortgage payments for up to 3 months, reducing the payments for up to 18 months, or in more severe cases, creating longer payback plans. Such assistance is provided on a case-by-case basis, and is designed to meet the individual needs of the borrowers.
• Fannie Mae recently announced that it has streamlined its procedures for handling insurance proceeds to provide lenders with more discretion in disbursing insurance proceeds. These improved procedures are based primarily upon the status of the mortgage at the time of the disaster and the extent of the damage. The new procedures are applicable for any federal or state declared natural disaster and will enable lenders top work more efficiently to address the needs of those borrowers who may require assistance.
• Lenders are now required to temporarily discontinue reporting delinquencies to credit bureaus if they are aware that the borrower’s delinquency is attributed to hardships as a result of natural disaster

CUNA Mutual Group (9/9/05 CUNA News Now)

CMG 24-hour Disaster Response Hotline: 1-800-637-2676

In areas declared disasters by the FEMA, the following measures were implemented:

• Premium grace period extension – The grace period for insurance premium payments (and some annuities) for policy holders in the affected areas has been extended by 60 days. CUNA Mutual will consider additional extensions as the recovery situation develops.
• Claim payments – CUNA Mutual will continue to make claim payments as follows: Previously scheduled electronic payments will be made to credit unions, until or unless the credit union requests another arrangement. The U.S. Postal Service will hold mailings that contain paper checks until they are deliverable.
• Claims processing – All claims originating from Katrina will be handled as quickly and efficiently as possible, and will be evaluated according to provisions of the insurance contract. On an individual claim basis, every effort will be made to limit requirements to expedite the distribution of funds.
• Policy renewals – If CUNA Mutual cannot contact a credit union or individual policyowner to renew an insurance contract, an automatic renewal will occur for that product. Any necessary changes to coverage limits or deductibles, etc., will be made once contact is restored with the insured.
• Standard billings and mailings, scheduled promotions in affected areas – Many residents in the affected areas are either engaged in securing basic needs or have vacated the area. CUNA Mutual is reviewing all scheduled billings and mailings intended for distribution in affected areas. The company is temporarily suspending mailings to these areas to ease the burden for credit unions and members.
• CUNA Mutual Mortgage Corp. – A hold has been placed on assessing late charges and credit bureau reporting for credit union members who have mortgages serviced by CUNA Mutual Mortgage, and who reside in the hurricane- affected counties. CUNA Mutual will also work with members on repayment plans and loss mitigation options.
• CMG Mortgage Insurance, Co. (CMGMI) – CMGMI is providing disaster relief for credit union members by recognizing the same payment relief options offered by Fannie Mae and Freddie Mac to avoid mortgage delinquencies and foreclosures, such as suspending or reducing mortgage payments, waiving late fees and not reporting delinquencies caused by the disaster to credit bureaus. CMGMI will conduct case-by-case evaluations to establish payment alternatives for credit union members.

Federal Employee Education and Assistance Fund (FEEA) (8/31/05 Release)

• Federal employees affected by this disaster may download an Emergency Assistance application from FEEA’s web site http://www.feea.org to apply for grants and no-interest loans to help with temporary shelter, clean-up, rebuilding and other expenses. Those in need may also contact FEEA at 1-800-323-4140 or 303-933-7580.

SBA and HUD Low Interest Disaster Assistance Loan Programs.

The U.S. Small Business Administration and the U.S. Department of Housing and Urban Development have programs established to help individuals and businesses recover from the affects of Hurricane Katrina and have established special websites for those seeking the information. The websites are the following:

• SBA: www.sba.gov/disaster
• HUD: www.hud.gov/katrina

FEMA

FEMA is issuing U.S. Treasury Checks and Electronic Funds Transfers. Treasury check security features can be found at http://www.fms.treas.gov/checkclaims/check_security_new.pdf. In addition, the FEMA disaster assistance check has "disaster assistance" written on the bottom left of the check and FEMA's Agency Location Code (the ALC is 70070002) is located on the second line of the check. Financial institutions can also call the FRB Richmond at the number given on the webpage and reference the check number. The FRB Richmond will be able to provide the recipient name and dollar amount but will not be able to confirm that the check is not a forgery.

FEMA has stopped the debit card program, but approximately 11,400 were distributed in Houston, Dallas, and San Antonio. Examples of the debit card are found in the attachments: DebitCard1.jpg, and DebitCard2.jpg. Debit card Q&A - FEMA_Card_FAQs

FEMA is NOT issuing handwritten checks. If you are presented with a hand written FEMA check, please make a copy of it so that we can attempt to verify its authenticity and refer it to the proper authorities.

U.S. Treasury Department accelerated enrollment procedures for direct deposit of SSI checks for evacuees. (http://www.godirect.org/ - Click on Media 9/13/05)

The U.S. Treasury Department is accelerating enrollment procedures for its direct deposit program for Social Security and Supplemental Security Income (SSI) checks for hurricane evacuees. However, interested parties my enroll by September 18 to have their October payment and future payments deposited into their credit union or bank account.

Evacuees that wish too enroll in the “Go Direct” automatic deposit program in time for October payments may simply call a toll-free hotline at (877) 654-6347 (English and Espanol). Trained representatives are available to help evacuees sign up. In addition, people without bank or credit union accounts can call this line to get help in setting up an account.

Benefit Payments

Treasury's Financial Management Service issued guidance to financial institutions on benefit checks (also U.S. Treasury checks) and third party drafts: http://www.fms.treas.gov/flexibility_thirdparty.html.

• This guidance offers advice to institutions attempting to verify the identity of a beneficiary. Please note that the issuing agency (SSA, VA, etc) WILL NOT verify identity to a third party but will identify an individual when that individual is on a three way call or speaker phone with the institution.
• As the guidance states, VA is issuing third party drafts with an accompanying letter signed by the Director of the regional office that is issuing the draft. An example of this letter may be found by following this link. This letter should also be on VA letterhead. An example of the check may be found by following this link. The appearance may vary between regional offices.
• The SSA is also issuing an accompanying letter, the letter would have text similar to that contained in attachment: SSA_letter.pdf. An example of the SSA benefit payment is in attachment: SSA.pdf. Most are computer generated, some may be hand written.

Please remember that forging a federal government document is a FEDERAL CRIME. Please make copies of any suspicious document that you receive, whether you cash it or not, and report it to the proper federal authorities, including, but not limited to, the U.S. Secret Service and the FBI. In addition, you should also send a copy to your regulator so that they can provide this information to prevent additional financial crimes.

NACHA (http://nacha.org/) 9/19/05 Operations Bulletin

– NACHA Decision on Rule Enforcement in Aftermath of Hurricane Katrina. NACHA decided that it will not impose penalties on financial institutions that originate destroyed check entries (XCK) from September 1, to October 31, 2005 in the area affected by Katrina.

Subsection 2.7.2 of the NACHA Operating Rules, allows destroyed checks to be collected via the ACA Network using the Destroyed Check Entry (XCK). An item may be collected as an XCK entry if it is in the possession of a financial institution and an electronic record has been retained of the MICR line and dollar amount of the check. The item must be eligible for presentation within a cash letter, even if the cash letter transmittal has not yet been prepared by the financial institution. For purposes of XCK entries, a cash letter is compromised of two or more checks in possession of a financial institution or its agent that have not yet been collected.

Questions may be directed to your Regional Payments Association or the NACHA Network Rules Department at (703) 561-1100.

The American Red Cross

The American Red Cross is distributing a Disbursing Order (DO) document ( ARC1.pdf, ARC2.pdf, ARC3.pdf, and ARC4.pdf) that can be used for the purchase of goods and/or services from authorized vendors. The Federal Reserve system is currently working with the ARC to make these forms available for cash at financial institutions. Some financial institutions with relationships with local chapters of the Red Cross have been converting these DOs to cash. Financial institutions ARE NOT obliged to convert these DOs to cash, only those comfortable doing so. We will provide more information on this initiative as it becomes available.

The American Red Cross is distributing a stored value card that is not redeemable at a financial institution for cash.

American Red Cross chapters may issue a hand written check for individual assistance as a last resort. Each ARC Chapter check is clearly identified with the local chapter's business information and generally carries the ARC corporate branding. We will provide more information on this initiative as it becomes available.