The government has forced two corporate credit unions to dump collateralized mortgage obligations devalued by interest rate increases.

Capital Corporate Federal Credit Union and Corporate One Credit Union recently have divested CMOs that failed the regulator's stress test, industry sources said.

J. Clayton Brooke, president of CapCorp, Landover, Md., declined to comment. Mark Starr, president of Corporate One, Columbus, Ohio, didn't return phone calls.

Other liquidity centers might be under regulatory pressure as the National Credit Union Administration cracks down on CMOs throughout the industry and prepares new investment regulations for corporates.

In an interview this week, National Credit Union Administration Chairman Norman E. D'Amours acknowledged that the agency had required two corporates to mark some investments to market value and sell them. He didn't identify the institutions.

The investments were "sizable," but sacrificing them did not threaten "the continued viability of the institutions," he said. The divestitures were taking place over "a short time frame," he added.

CapCorp, which has $1.4 billion of assets, and Corporate One, which has $1.1 billion, are two of about 10 corporates that invest most of their money outside U.S. Central Credit Union, the industry's liquidity center.

At June 30, the most recent data available, both institutions had a large chunk of their money invested in CMOs and real estate mortgage investment conduits, or Remics.

CapCorp had $989 million of such instruments, and Corporate One had $525 million, according to Veribanc Inc., a rating service in Wakefield, Mass.

The 43 corporates had $61.5 billion of assets and $10.3 billion in CMOs and Remics.

Mr. D'Amours said that more divestitures could be coming. Last month, H. Allen Carver, director of the NCUA's Office of Corporate Credit Unions, told an audience of corporate officials that about six institutions were having "difficulties," according to sources familiar with the meeting.

The divestitures are part of an industrywide crackdown by the agency on CMOs, including those held by regular credit unions.

Credit unions must mark most CMOs as "available for sale," regardless of whether they pass a stress test, beginning Jan. 1.

That's when the NCUA will require compliance with its interpretation of the Federal Accounting Standards Board's rule on marking investments to market, known as FAS 115.

Also, credit unions will be required to subtract unrealized losses from capital, which could cause wild changes in capital levels.

Mr. D'Amours said credit unions, including corporates, are sufficiently capitalized to deal with such swings.

According to the agency, about 1,100 credit unions hold $7 billion of CMOs, with 300 having large portfolios.

Mr. D'Amours said the agency's experience in observing value fluctuations of CMOs may lead it to tighten regulation of those investments for corporates.

Some corporate officials fear that the regulator might clamp down too hard.

Corporates are "afraid" the agency "will look at a couple of cases so even those that know what they're doing won't be able to" invest in CMOs, said Richard Johnson, president of Western Corporate Federal Credit Union, San Dimas, Calif.

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