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NCUA Board Addresses Asset Securitization, OTR, and Modernization
Tuesday, June 27, 2017 6:50 AM

The National Credit Union Administration board met Friday for its June board meeting, it's fifth of 2017, to cover a range of items including asset securitization, the overhead transfer rate methodology, and a board briefing on the Enterprise Solution Modernization Program, among others.

Final Rule, Part 709, Safe Harbor
Part 709 of the safe harbor rulemaking with respect to asset securitization will provide a safe harbor for assets transferred by a federally-insured credit union as part of a securitization or participation.

The final rule amends part 709 to update NCUA's regulations regarding the treatment by the NCUA Board, as liquidating agent or conservator of a federally insured credit union, of financial assets transferred by the credit union in connection with a securitization or participation. The amendments will resolve issues that were raised by past modifications to generally accepted accounting principles and parallel changes made to the Federal Deposit Insurance Act. The final rule tracks the language of the FDIC's corresponding safe harbor rule. The final rule defines the conditions for which transfers of financial assets would be made after the effective date of this rule.

In conjunction with this rule, NCUA issued a legal opinion letter to make it easier for federal credit unions to package and sell loans. The significant part of the opinion reads, "An FCU does have the authority to issue and sell securities as a power incidental to its operation, and, in the case of Government National Mortgage Association (Ginnie Mae) securities, as a power expressly authorized under the Federal Credit Union Act."

Read the opinion letter.

NCUA staff noted that additional guidance on this subject will be issued within the next three to four months. However, it was also noted that it is possible now for a federal credit union to begin the process of creating an asset securitization program prior to the release of the guidance.

Overhead Transfer Rate Methodology
The Overhead Transfer Rate (OTR) represents insurance-related costs in NCUA's operating budget. The newly proposed changes are being issued to reduce the complexity of the OTR methodology. The proposed changes would also reduce the resources needed to administer the OTR. Comments must be received within 60 days after publication in the Federal Register.

Review the presentation slides.

Enterprise Solution Modernization Program
The NCUA Board received an update on the Enterprise Solution Modernization Program. The program's primary objective is to replace antiquated IT applications and will provide NCUA with quicker access to new capabilities, including critical security updates. The program has been broken down into 3 parts: Examination and Supervision, Data Collection and Sharing, and Enterprise Data Reporting. The program will use existing commercial tools, rather than customized systems. Once in place, the program will reduce the amount of examination and supervision time spent in credit unions.

Other Items
The board adopted a final rule on Part 747, Statutory Inflation Adjustment of Civil Money Penalties. The rule amends regulations to adjust civil money penalties to account for the rate of inflation.

The board adopted a final rule on Part 792, Freedom of Information Act (FOIA). NCUA first published an interim final rule on Dec. 22, 2016, to revise its FOIA regulation in accordance with the FOIA Improvement Act of 2016. The revisions were necessary to comply with amendments to the FOIA Improvement Act of 2016.

The board issued a proposed rule on Part 704, Corporate Credit Unions. The proposed amendments would revise provisions regarding Retained Earnings and Tier 1 Capital. Acting Chairman J. Mark McWatters said, "It's time to slowly, but prudently remove the shackles on corporate credit unions."

Additional details about the meeting are available on NCUA's website.