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NCUA Says Proposed Rules Cut Red Tape
Monday, June 23, 2014 6:25 AM

During the open meeting of the National Credit Union Administration Board, the governing body unanimously approved five items for federal credit unions, four of which are outlined in brief below.

  1. A proposed rule expanding the powers of federal credit unions by allowing qualified institutions to securitize loans they have originated.
     
    Qualified federal credit unions would be able to securitize loans if they meet certain criteria under a proposed rule approved by the Board. NCUA Board Chairman Debbie Matz said securitization can be an effective tool for very large credit unions that have the capacity and expertise to handle these transactions.
     
    "As the credit union system becomes larger and more complex," Matz said, "more credit unions are developing the scale and expertise to offer sophisticated innovations. Securitization is complex and has the potential to tap new sources of liquidity and mitigate interest rate risk. However, it would also create an additional layer of risk. Most credit unions do not yet originate enough loans to sponsor securitizations, but for those that do, it is prudent to propose specific safety and soundness provisions."
     
    Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.
     
  2. A proposed rule creating safe-harbor protection for certain securitized assets and protecting investors in cases of conservatorship or liquidation.
     
    The Board also approved a proposed rule providing a safe harbor for assets transferred by a federally insured credit union in connection with a securitization or participation.
     
    Matz called the proposed rule "essential to creating a viable market for credit union securitizations," adding that it would protect investors in the unlikely event of a credit union being conserved or liquidated, and that it would provide greater certainty to promote investor confidence and a level playing field for credit unions to sponsor securitizations.
     
    Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.
     
  3. A proposed rule to assist underwater borrowers by allowing federally insured credit unions to refinance or modify real estate loans without obtaining an additional appraisal.
     
    This proposed rule provides a measure of relief to both federally insured credit unions and homeowners who are underwater in their mortgages through no fault of their own. Matz said the proposed rule "gives relief to homeowners and reduces unnecessary paperwork for credit unions."
     
    The proposed rule would encourage more federally insured credit unions to modify or refinance mortgages in markets where home prices have declined. The rule would allow a federally insured credit union to refinance or modify a real estate-related loan it holds without obtaining an appraisal if there is no advancement of new monies or with an advancement if there is adequate collateral protection.
     
    The rule would eliminate the current duplicative requirement that federal credit unions provide members copies of appraisals for loans secured by a first lien on a dwelling, as recently finalized Consumer Financial Protection Bureau regulations also require credit unions provide copies of such appraisals.
     
    Comments on the proposed final rule, available online here, must be received within 60 days after publication in the Federal Register.
     
  4. A final rule reducing administrative burdens on solvent credit unions that voluntarily liquidate.
     
    Solvent federal credit unions that decide to liquidate voluntarily will have fewer administrative hurdles, and members will have better protection, under the Board-approved final rule.
     
    "This rule will reduce administrative burdens and ensure every credit union member receives all their insured funds," Matz said. "We are not encouraging more credit unions to liquidate, but we want to make the process as efficient as possible when they do make this decision. This rule is more than 20 years old, so it's a perfect candidate for our Regulatory Modernization Initiative."
     
    The revised rule:
    • Increases asset-size thresholds for certain procedural requirements in a voluntary liquidation.
    • Gives credit unions greater flexibility to use electronic means to publish creditor notices and issue member share payouts.
    • Provides that preliminary distributions to members are permitted up to the insured limit applicable to each member’s account.
     
    The final rule, available online here, will become effective 30 days after publication in the Federal Register.

You can read more about the NCUA board's actions on their website.