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Advocacy Leaders Take Note: Comment Call Deadlines Approaching
Monday, December 29, 2014 6:05 AM

Flood Insurance Proposed Rule
Comments due to NCUA by December 29

  • ​NCUA issued a proposed rule that would implement requirements under the Homeowner Flood Insurance Affordability Act of 2014, which modifies and improves some of the requirements from the Biggert-Waters Flood Disaster Protection Act.  
  • CUNA is supporting the proposal but will be seeking some clarifications such as in definitions.  
  • Specifically this proposed rule would:
  • Modify escrow requirements by creating several exceptions. Most important is the exception from the rule for home equity lines of credit. Second mortgages would still be covered.
  • Create a detached structure exemption from mandatory escrow requirements.
  • Apply to loans entered into or outstanding on or after January 1, 2016.
  • Credit unions with less than $1 billion in assets will not be subject to the rule.
  • The rule does not impact forced place or private insurance requirements proposed in the 2013 flood insurance rule.

Corporate Credit Unions
Comments due to NCUA by January 5

  • NCUA's proposed rule would make a number of changes to the definitions of Part 704, its corporate credit union regulation, along with a few changes to other sections.  
  • In its comment letter, CUNA will be raising concerns about issues related to corporates credit unions' capital. 

Specifically the proposal would:

  • Base a corporate credit union's lending limit on its total capital. (Currently a corporate's unsecured member lending is limited to 50 percent of capital and its secured member lending to 100 percent of capital. (The unsecured limit would remain but would be based on total capital; the secured lending limit would be raised to 150% of total capital.)
  • Extend a corporate's borrowing limit from 30 to 120 days.  A longer term limit of one to two years might give corporates more flexibility in providing liquidity to credit unions.
  • CUNA is concerned that NCUA is hampering the corporates' ability to provide liquidity to the credit union system with requirements that do not allow corporates to use fully the capital that they have in place.
  • The rule would allow NCUA to apply a similar CUSO rule to corporates as is not in place for natural person credit unions.
  • The rule would require that corporates implement an enterprise risk management program.

Federal Home Loan Bank (FHLB) Membership
Comments due to FHFA by January 12

  • The Federal Housing Finance Agency (FHFA) issued a proposed rule that would make regulatory changes to Federal Home Loan Bank (FHLB) membership rules. The proposed rule requires that the initial FHLB membership requirements be met continuously. FHLB members found to be out of compliance would be given one year to return to compliance. Any institution that remains out of compliance for two consecutive years would be terminated.
  • The Federal Home Loan Bank Act sets two requirements for initial membership, both of which would need to be met at all times under the proposal:
    • 10% Test: All credit unions, as well as banks with assets above $1 billion in assets, are required to have at least 10% of assets in "residential mortgage loans." "Residential mortgage loans" comprise most real estate loans of any duration, including junior loans, loans for manufactured housing, and construction loans. By statute, banks with assets below $1 billion are considered "Community Financial Institutions" or "CFIs" and are exempt from this requirement.
    • 1% Test: In addition to satisfying the 10% test, all FHLB members (including CFIs) are required to have one percent of assets in "home mortgage loans." "Home mortgage loans" are long duration (five years or longer) first lien single and multi-family mortgages, mortgage backed securities, or collateralized mortgage obligations.
  • The proposed regulation is unnecessary, and fundamentally at odds with regulations from other agencies. NCUA's proposed risk based capital rule and the Basel III-based capital rules for banks both limit concentration in specific asset classes. Here, FHFA is requiring concentration in residential mortgages. Given housing caused the last financial crisis, this puts the safety and soundness of financial institutions at risk.
  • The proposal imposes new regulatory burdens on FHLB members. Because credit unions will need to continually monitor the amount of assets directed to housing, the regulation will artificially distort balance sheet management practices. It decreases the flexibility of credit unions to manage their assets and liabilities in response to changing market conditions.
  • CUNA will urge FHFA to correct the disparate treatment between banks and credit unions included in the proposal. While the statute does not allow credit unions to be considered CFIs for purposes of securing FHLB membership, FHFA has flexibility in the requirements it sets for maintaining membership. All credit unions should be treated as CFIs for purposes of maintaining FHLB membership, and should only have to meet the 1% test on an ongoing basis.
  • CUNA's preliminary analysis of the rule and points for credit unions is in CUNA's Comment Call.