NASCUS Comments on Reg Revisions Concerning Investment in Exchangeable CMOs

ARLINGTON, Va. – Noting that since NCUA Rules and Regulations Part 703 authorizing investment activities for federally chartered credit unions does not apply to state-chartered, federally insured CU, NASCUS limited its comments to Part 704 of the regulation in its April 2 comment letter on proposed changes to the regulation concerning “Investment in Exchangeable Collaterized Mortgage Obligations.” “NASCUS supports the objective of this proposed rule to make this class of securities more accessible to all corporate credit unions,” NASCUS President/CEO Mary Martha Fortney wrote to NCUA Secretary of the Board Becky Baker. “Collaterized Mortgage Obligations (CMOs) are an important investment tool for corporate credit unions. Increasingly, those CMOs contain exchangeable features. Limiting corporate credit union investments to CMOs without exchangeable features unnecessarily curtails corporate credit union options for diversification and therefore impairs the credit union’s ability to manage risk,” the letter reads. However, Fortney explained, while NASCUS supports the objectives of the rule to provide corporate credit unions a good means of managing their portfolio, there is some thought that within Part 704 there are already mechanisms to control this and that “proposed provisions add an unnecessary element of complexity to the overall objective of the proposed rule.” Fortney wrote that, “Current Part 704.8, Asset and Liability Management, already details the steps a corporate credit union must take to manage its investment portfolio. Existing Part 704.8 requires interest rate risk modeling and sets NEV limits for corporate credit union asset management. NCUA should allow corporate credit unions to demonstrate their ability to management exchangeable CMOs within the existing parameters of current part 704.8. -