NCUA Eases Rules On CMOs

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ALEXANDRIA, Va. - (06/25/04) -- The NCUA Board Thursday voted toamend the agency 703 and 704 investment rules to allow naturalperson and corporate credit unions to invest in collateralizedmortgage obligations that have stripped mortgage backed securities,known as interest-only or principle-only strips, in them. Theamendment was prompted by NCUA's discovery that several corporateswere holding CMOs with strips in them, in violation of the agency'scurrent rules. The amendment will allow investments in CMOs withstrips under certain conditions, which including meeting price andamortization tests.

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