More Losses Seen On MBS
ALEXANDRIA, Va.-The deterioration of the mortgage market and rising foreclosures and delinquencies is expected to cause increasing losses on billions of dollars of mortgage-backed securities being held by corporate CUs, according to NCUA.
The prediction comes as NCUA revealed it has pumped almost $20 billion into U.S. Central FCU and WesCorp FCU over the last six months to keep the two corporates afloat.
Scott Hunt, director of NCUA's Office of Corporate CUs, said current estimates are that U.S. Central will have a loss of $1.7 billion and WesCorp a loss of $5.7 billion on their mortgage securities, but agency officials expect those numbers to be even higher because of the ongoing deterioration in the market.
Hunt cited several factors: ongoing rise in foreclosures; growing delinquencies among payment option ARMs; and growth in mortgage refinancings.
The further deterioration of the primary mortgage market is expected to take an additional toll on those corporates that have large holdings of mortgage-backed securities, Hunt explained. All corporates are already under a strict capital restoration plan, he noted.
Hunt said the agency believes it had successfully stemmed a "silent run" on the corporates that occurred in 2008 by pumping almost $20 billion into the system. That included a $10-billion emergency loan from the National CU Share Insurance Fund into U.S. Central and WesCorp; $8.2 billion of so-called CU Systems Investment Program, or SIP notes; a $1 billion capital note from NCUSIF into U.S. Central; and $450 million of so-called CU HARP funds through the Central Liquidity Facility.
Guarantees on all corporate deposits helped boost confidence in the system, he said.
