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FHFAs monitoring plan unneeded for CUs CUNA
WASHINGTON (3/30/11)--Credit union commitment to long-term mortgage lending is unquestioned, and a Federal Housing Finance Administration (FHFA) does not need to impose ongoing mortgage lending monitoring requirements on credit unions who use the Federal Home Loan Bank (FHLB) System, the Credit Union National Association (CUNA) said in a recent comment letter. The FHFA has issued an advance notice of proposed rulemaking (ANPR) seeking comments regarding a plan to require FHLB-member institutions to periodically file reports in order to confirm that they remain committed to long-term mortgage lending. The ANPR noted the FHFA could at a future date also propose establishing a minimum dollar amount for volume of mortgage originations, and could propose requiring credit unions and other FHLB-members to continuously monitor their balance sheets to ensure that 10% of their total assets are residential mortgage-related assets. If FHFA chooses to move forward on the issues outlined in the ANPR, it would issue a proposed rule at a later date for an additional comment period. The Federal Home Loan Bank Act requires FHLB members to have at least 10% of their assets in long-term residential mortgages and also imposes other requirements related to residential mortgage lending activities on FHLB members; current FHLB policy, however, only requires institutions prove that they meet the act’s requirements at the time they apply to be an FHLB member. CUNA noted in its letter that credit unions already are subject to significant mortgage lending reporting requirements under the Home Mortgage Disclosure Act (HMDA), and said the FHFA plan would be duplicative and unnecessarily burdensome on “already over-burdened” credit unions. FHLB-member credit unions, CUNA wrote, meet or exceed the FHLB membership requirements, such as the requirement to hold 10% of assets in “residential mortgage assets” such as first and second residential mortgages and/or related products like residential mortgage-backed securities. “In the aggregate, credit unions held 38.9% of their assets in residential first mortgages and 15.6 % of their assets in second-lien residential mortgage products as of November 2010, far exceeding (the 10% requirement) without even considering credit union holdings in residential mortgage-backed Securities,” the letter said. CUNA added, “Credit unions—by their very nature as member-owned, not-for-profit cooperatives dedicated to promoting thrift and making loans to members at reasonable rates” meet the act’s requirements regarding members’ “character of management” and having a home-financing policy that is consistent with sound and economical home financing. If FHFA chooses to move forward with the ANPR, credit unions should not be subject to ongoing compliance reporting, but rather only be required to make a report to its FHLB if and when the credit union has fallen out of compliance, CUNA recommended. Also, any FHLB member which has fallen out of compliance should have at least 90 days to make such a report to its FHLB, and should be given at least a one year grace period to come back into compliance so long as the institution agrees to make a good faith effort to comply, CUNA said.

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