WASHINGTON--Reforming the capital treatment of mortgage servicing assets and real estate exposures under NCUA’s risk-based capital framework is needed, and America’s Credit Unions outlined their suggested changes Friday in a letter to NCUA Chairman Kyle Hauptman.
America’s Credit Unions recommends NCUA initiate rulemakings to:
- Eliminate the MSA deduction threshold to match anticipated forthcoming bank reforms. The current threshold discourages credit unions from building servicing operations without addressing any demonstrated risk
- Adopt loan-to-value-sensitive mortgage risk weights so capital charges reflect actual credit risk, rather than a flat ratio
- Preserve statutory comparability with the bank capital framework, as required by the Federal Credit Union Act
- Support the return of mortgage activity to regulated depositories and away from nonbanks that lack stable funding and prudential oversight
ACU said these changes would provide particular relief for smaller credit unions, which are disproportionately affected by the expensive upfront investments.
"These investments can often only pay off at higher volumes of servicing mortgages," ACU noted.