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CU Trade Group Voices Opposition to Proposed FHLB Requirements

red-tapeA national trade group representing credit unions has come out against a recent proposal to revise requirements for Federal Home Loan Bank (FHLB) membership.

In a comment letter addressed to the Federal Housing Finance Agency's (FHFA) general counsel, Alicia Nealon, director of regulatory affairs for the National Association of Federal Credit Unions (NAFCU), voiced the association's opposition to the proposal, which she says would "disenfranchise over 1 million credit union member-owners."

"Given the onerous nature of this proposal on credit unions, the lack of a Congressional mandate for 'ongoing' FHLB membership requirements and the current requirements that already exist for FHLB members to demonstrate a commitment to housing finance, NAFCU must oppose the proposed rule and urge its withdrawal," Nealon wrote.

NAFCU's complaint stems from a provision of the proposed rule that would require FHLB members and applicants to keep 1 percent of assets in home mortgage loans. Current members would also be required to hold at least 10 percent of assets in residential mortgage loans on an ongoing basis as opposed to just at the time of application, as the current rule requires.

In her comment letter, Nealon says the membership requirements fail to take into account a credit union's asset size or experience level. She also says NAFCU is concerned that the standards (particularly the 1 percent requirement) don't take into account the kinds of fluctuations that can happen in portfolios due to changes in economic conditions.

As an alternative, the group suggests that the agency allow loans sold in the secondary market to count toward an institution's 1 percent threshold.

Also of concern to NAFCU is FHFA's proposal to determine if FHLB members meet eligibility standards on a yearly basis and to terminate any members that fail to comply after a two-year grace period. The group instead suggests a five-year probationary period for lenders to get back up to standard.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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