June 20, 2014 – The NCUA Board on Thursday issued a proposed rule on asset securitization authority for credit unions and approved updates to its rule on voluntary liquidations to accommodate credit unions’ use of technology.Yesterday’s proposal on asset securitization – an authority urged by NAFCU in its “Dirty Dozen” list – would clarify that a federal credit union, and a federally insured, state-chartered credit union where state law allows, may securitize loans that it originates. It is "an activity incidental to the business for which an FCU is chartered," according to the rule summary.
NCUA says it has determined that the securitization authority meets the three-part test set under the Federal Credit Union Act for incidental powers as long as the assets affected are loans that were originated by the sponsoring federal credit union to its members.
The proposal also sets seven minimum safety-and-soundness requirements for asset securitization. Among these are independent risk management controls and a limit on carried residual interests and retained interests to 25 percent of the credit union's net worth. This calculation does not include carried interests in pass-through securities.
NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt said NAFCU welcomed NCUA's issuance of this proposed rule and the final rule on voluntary liquidations. She added, “Credit unions are drowning in regulatory burden and do not need new, restrictive regulation.”
The asset securitization proposal is out for a 60-day comment period. NAFCU is preparing a Regulatory Alert seeking members’ input.Also yesterday, the board: