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NCUA chairman pushes for CU initiatives
WASHINGTON (12/10/08)—National Credit Union Administration (NCUA) Chairman Michael Fryzel made the rounds on television news shows Tuesday to talk up his proposed initiatives; the Credit Union Homeowner Affordability Relief Program (CU HARP) and Credit Union System Investment Program (CU SIP). Fryzel, addressing national audiences on CNBC and then on Fox Business Network, said that while credit unions generally did not participate in the kinds of activities that spurred the housing and mortgage crisis, some are facing liquidity problems due to the current economic turmoil. He outlined two programs he has recently proposed to help troubled homeowners and to add liquidity to the system. Under the former, CU HARP, the NCUA, through its Central Liquidity Facility (CLF), would work with credit unions and their members to temporarily lower monthly mortgage payments. The program would need NCUA Board approval, as well as an okay by the U.S Treasury Department and the Federal Reserve Board. According to an NCUA announcement last month, the CLF would provide credit unions with funds, borrowed from the Treasury, at lower rates than otherwise available through private sources. In turn, credit unions are expected to pass the entire rate reduction to struggling low- and moderate- income borrowers. The credit union, in exchange for the reduced likelihood of borrower default on the mortgage, would also match the rate break, doubling the benefit to struggling homeowners, Fryzel said of the plan. The agency said CU HARP would be administered at no cost to taxpayers: CLF loans are made to credit unions on a fully secured basis, and all advances received by the CLF will be repaid to the Treasury's Federal Financing Bank, with interest. The program will receive initial funding of $2 billion. The second program, NCUA’s CU SIP, is designed to complement CU HARP by enabling the CLF to lend to credit unions to invest in NCUSIF guaranteed notes, the proceeds of which will be used to retire external system debt, said the NCUA in a release. It added that the program will free collateral pledged by corporate credit unions and thereby provide increased contingent borrowing capacity. CU SIP will be funded on a monthly basis from January through June of 2009. The NCUSIF guarantee is provided under the Temporary Corporate Credit Union Liquidity Guarantee Program announced in October. The program guarantees senior corporate credit union debt for a 75 basis point fee. In the release Fryzel said, “As I have stated previously, I want to use all tools at my disposal to address the difficulties that the larger market problems are presenting for the credit union industry. These new initiatives represent an important avenue for credit unions: both CU HARP and CU SIP employ the existing CLF channel and direct liquidity where credit unions and their members need it most. I encourage credit unions to use these programs constructively as they work through these difficult times.” Use the resource link below to access the CU HARP and CU SIP term sheets.
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