ALEXANDRIA, Va. NCUA said this afternoon it increased its subsidized lending from the U.S. Treasury to help fund the corporate credit union bailout last year to $5.1 billion, from $3.5 billion in 2011.
The subsidized rate on the loans rose slightly to just 0.191% in 2012, from 0.165% in 2011, far below the market rate, according to new information published by NCUA today in conjunction with the annual audit for the Temporary Corporate CU Stabilization Fund.
During 2012, NCUA borrowed $1.9 billion in new subsidized funding from the Treasury to help finance the bailout expenses and repaid $300 million of its loans, incurring just $6.6 million of interest on outstanding principal.
In comparison, NCUA borrowed $3.5 billion from the Treasury in 2011 and paid just $2.5 million in interest.
The low Treasury rate for funding the corporate bailout was set out in a 2009 Memorandum of Understanding with the Treasury at the commencement of the corporate bailout, which could extend for as long as 12 years. The interest rate resets on each anniversary at a rate equal to the average market yield on the outstanding marketable obligations of the United States with maturities equal to 12 months.
NCUA also reported the outstanding principal balance of the NCUA Guaranteed Notes, which were sold the public as part of a resecuritization of some $35 billion of mortgage-backed securities held by five failed corporates was $21.2 billion at December 31, 2012, down from $24.7 billion the year before.
The main sources of ongoing funding for the corporate bailout fund are the low-rate Treasury loans; special assessments charged federally insured credit unions, and distributions from the National CU Share Insurance Fund.
The funds are being used to liquidate five corporate failures: U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitutions Corporate FCU, which at one time held a total of $50 billion of underwater mortgage securities between them.
Federally insured credit unions have paid more than $4 billion in corporate assessments over the past four years, including $792 million in 2012, and $2 billion in 2011.
The corporate bailout has cost credit unions more than $10 billion so far, including $6 billion in lost capital form the five corporate failures, and is projected to cost as much as $20 billion.
