ARLINGTON, VA.–What exactly does “in danger of insolvency” mean when it comes to emergency mergers? That’s the question NAFCU has asked of NCUA in a letter to the agency authored by Regulatory Affairs Counsel Ann Kossachev.
The letter is in response to the proposal made during the NCUA's July board meeting. The proposal is intended to give the agency more flexibility in situations where an emergency merger is necessary, NCUA said.
NCUA is proposing to add a fourth category to the "in danger of insolvency" definition and, for two of the three current categories, lengthen by six months the timeframe the agency has to forecast a credit union's future insolvency when a predictive assessment of the credit union's declining net worth is in play.
NAFCU said that overall it is supportive of the modification to modernize forecasting procedures for emergency mergers. In the letter, Kossachev suggested more transparency from the agency as it starts following the new timeline for determining "in danger of insolvency."
The best way to guarantee that the NCUA effectively helps troubled credit unions merge with willing partners "in a timely and efficient manner is to most accurately predict when a credit union is likely to become insolvent," wrote Kossachev. "As part of this process, prospective merger partners should be fully apprised of important information regarding the selection process and should also have the opportunity to make their case for the merger. Additionally, the NCUA should provide prospective merger partners with a written explanation of the reasons for its decision."
Meeting With Senator
Separately, NAFCU President and CEO Dan Berger met with Sen. Tim Scott (R-SC) late last week to discuss issues affecting the credit union industry and ways to reduce regulatory burden to make it easier for credit unions to serve their members and communities.
Scott, who spoke to hundreds of credit union representatives at NAFCU's Congressional Caucus in September, reiterated his confidence in credit unions' mission to serve the underserved during the meeting.
Scott recently introduced the Credit Score Competition Act that would require the Federal Housing Finance Agency to create a process for validating and approving credit scoring models that take into account non-traditional credit indicators for mortgage purchases.
Under the current system, Fannie Mae and Freddie Mac use an outdated model that doesn't take into account rent utility and cell-phone bill payments, which Scott said "disproportionately hurts African-Americans, Latinos, and young people who are otherwise creditworthy."
The two also talked about upcoming legislative efforts that will create a healthier regulatory environment for credit unions to provide credit to consumers and small businesses, a key tenet of NAFCU's regulatory reform agenda, the trade association stated.