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NAFCU on Friday applauded NCUA for issuing a proposal that essentially expands the authority of federal credit unions to invest in bank notes.

The current investments regulation limits federal credit unions to investing in bank notes "with original weighted average maturities of less than five years." The proposal removes the word "original" from the text of the regulation, thereby allowing federal credit unions to purchase bank notes that had original maturities of greater than five years but still have remaining maturities of less than five years.

"NAFCU has received feedback from multiple credit unions that the ‘original' requirement attached to the ‘weighted average maturity' limitation has proven to be overly restrictive and detrimental to FCU investment opportunities," NAFCU Regulatory Affairs Counsel Alexander Monterrubio wrote in a comment letter Friday to NCUA. "As a result, NAFCU supports the proposal because we believe it will provide credit unions with greater flexibility and much-needed regulatory relief."

Additionally, Monterrubio recommended that NCUA allow credit unions to purchase mortgage servicing rights as an investment. "The FCU Act does not contain any provision expressly prohibiting the purchase of MSRs as an investment," he wrote. "NAFCU and our members strongly encourage NCUA to remove this arbitrary prohibition."