ALEXANDRIA, Va. – NCUA said federal credit unions may sell their loans to a registered mutual fund that organizers are hoping will form the basis of a new secondary market for credit unions.
The legal opinion clears credit unions to sell their member business loans to the unformed fund, as part of the project, according to Guy Messick, a Philadelphia attorney who is working to create the fund.
The big question NCUA must still answer is whether credit unions may also invest in such a fund, noted Messick. “We have built the car, we’re just waiting for NCUA to give us the engine,” he told the Credit Union Journal yesterday.
The MBL fund would be modeled after similar funds planned by CUNA Mutual. NCUA approved the insurer’s MBL fund as a pilot program, but CUNA Mutual abandoned the project, which was to also have included a mortgage fund, a small business loan fund and others, amid the decline in the economy.
Messick, one of the pioneers in CUSOs, sees the MBL fund as a secondary market conduit for credit union assets, giving credit unions both an outlet to sell assets and to invest in credit union assets at the same time. Such an option could serve as an alternative to the troubled secondary mortgage giants Fannie Mae and Freddie Mac by creating a new secondary market for credit union mortgages, he explained.
Messick is hoping NCUA will approve credit unions’ investment in such funds as it rewrites its investment rule 703, expected later this year.
