ARLINGTON, Va.—NAFCU is urging NCUA to "carefully consider the importance of establishing a level playing field" as it crafts its upcoming guidance on asset securitization by federal credit unions.
NAFCU made the request in a letter to the agency in response to a June NCUA legal opinion letter on federal credit unions' authority to issue and sell securities. NAFCU is also seeking a meeting with the agency to discuss the legal opinion letter and the upcoming guidance on asset securitization.
In the letter NAFCU Regulatory Affairs Counsel Ann Kossachev noted the changes and improvements in the financial landscape in recent years. She said "credit unions should be given every opportunity possible to help their members achieve the American dream and establish financial stability."
She offered the following recommendations for the agency's upcoming guidance on asset securitization:
- Expand the eligibility of loans beyond those originated by the securitizing credit union, include purchased loans needed to complete a pool and allow the aggregation of loans by credit union service organizations
- Provide flexibility in the levels of residual and retained interests in securitized assets that a credit union may hold
- Authorize credit unions to have special-purpose vehicles with the authority to enter into derivative transactions
- Provide additional clarifications on the types of securitization transactions in which credit unions may engage
"To create workable and sustainable securities that appeal to private investors, NAFCU and its member credit unions believe that the above recommendations must be incorporated in the guidance," Kossachev wrote.
Kossachev stressed that many credit unions don't have the capacity to originate the volume of loans necessary to carry out securitization on their own and that guidance from the NCUA "must permit aggregation mechanisms."
Kossachev detailed NAFCU's recommendations, including why CUSOs need to be allowed to securitize and why the use of credit enhancements should be authorized. She expressed the association's hope that the upcoming guidance would reflect "considerable flexibility" to provide the credit union industry "with endless opportunities for success."