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NCUA Board Approves Texas MBL Rule; Highlights of Final 2016 Meeting
Friday, December 16, 2016 6:40 AM

The National Credit Union Administration met Thursday morning for its final board meeting of 2016. The agenda included a quarterly report of the Corporate Stabilization Fund; a final rule for federal credit union occupancy provisions; an interim final rule related to the Freedom of Information Act; approval of the revised Texas Member Business Loan Rule; and a board briefing on the NGN Legacy Asset Disposition Strategy. Highlights of the meeting include the following:

Approval of Revised Texas Member Business Loan Rule

States that wish to adopt their own member business lending rules are required to receive NCUA board approval. NCUA originally approved the Texas Credit Union Department member business lending rule in November of 1999, and today's rule change now makes it similar to NCUA's current member business lending rule. Approval of the Texas state rule ensures that Texas state-chartered credit unions will not be disadvantaged. 

Corporate Stabilization Fund Quarterly Report

NCUA staff reported that the Stabilization Fund's net position has increased from just over $1 billion to $1.5 billion during third quarter 2016. The increase is the result of continued improvements in legacy asset cash flows and legal recoveries. The Stabilization Fund's third-quarter net income was $478 million. 

Final Rule, Parts 701 and 721, Federal Credit Union Occupancy, Planning, and Disposal of Acquired and Abandoned Premises

The board voted to finalize the Federal Credit Union occupancy rule. The final rule changes the NCUA's fixed assets rule in order to not require full occupancy and allows more flexibility in leasing and renting unused space. The rule removes the requirement that a federal credit union must plan for, and eventually achieve, full occupancy of an acquired premises.

Interim Final Rule, Part 792, Freedom of Information Act

The board voted to adopt an interim final rule to implement new procedures for greater transparency and disclosure of frequently requested records under the Freedom of Information Act (FOIA). This interim rule is in response to recent changes to federal law adopted by Congress.

Board Briefing, NGN Legacy Asset Disposition Strategy

The Corporate System Resolution Program was originally established on Sept. 24, 2010.  As part of the resolution, the NCUA created the NCUA Guaranteed Note (NGN) Program to provide long-term funding for distressed investment securities (Legacy Assets) from the five failed corporate credit unions.  The Legacy Assets consist of more than 2,000 investment securities, secured by approximately 1.6 million residential mortgages, as well as commercial mortgages and other securitized assets. NCUA transferred those Legacy Assets to NGN trusts. The NGN trusts then issued approximately $28.3 billion of NGNs, backed by the cash flows from the Legacy Assets.  

In November it was announced that a settlement was achieved with J.P. Morgan, which enabled the Stabilization Fund to repay $2.2 billion of US Treasury borrowings in 2013. As of October 2016, NCUA fully repaid the US Treasury.

NCUA staff reported in the briefing that three NGN series have matured to date with 15 NGN series still outstanding. Because none of the NGNs have a "call" feature, it is not possible for the NGNs to be retired early.

Staff announced that the total projected resolution costs (net) is expected to range between $5.5 billion and $7.0 billion. Projected rebates on the $4.8 billion of assessments paid to date range from $2.5 billion to $3.2 billion. Economic changes, legacy asset performance and certain requirements of the Federal Credit Union Act will dictate the timing and any amount of potential rebates. Potential rebates may not be issued until the Stabilization Fund closes in 2021. Potential rebates to holders of depleted capital in failed corporate credit unions cannot be made until other obligations are paid.

Access to NCUA's prepared remarks on the NGN Legacy Asset Disposition Strategy may be found here. NCUA maintains a section of their website devoted to the NGN program here.