A move to sharply curtail mortgage securities investments by credit unions is getting mixed reviews from Wall Street.

Some market executives say the proposed limits - which the National Credit Union Administration plans to consider at its January board meeting - would deprive Wall Street of a small but profitable clientele. The Bond Market Trade Association, formerly known as the Public Securities Association, has denounced the NCUA's plan as an "arbitrary," one-size- fits-all solution.

But others say the collapse last year of a large corporate credit union had that invested heavily in mortgage instruments - Capital Corporate Credit Union of Lanham, Md. - hurt the mortgage market's reputation and underscored the corporates' lack of financial sophistication.

By getting marginal players out of the market, "you prevent disasters that make the mortgage industry look bad," asserted Linda Lowell, a first vice president at PaineWebber Inc.

The NCUA - which regulates 11,000 federally and state-chartered credit unions and the 41 corporate credit unions that oversee their investments - was thinking of limiting mortgage investments even before the Capital Corporate failure, a spokeswoman said. But the agency, based in Alexandria, Va., stepped up scrutiny of mortgage investments after the collapse, which cost 250 member credit unions $23 million.

By any measure, credit unions are bit players in the $1.6 trillion market for mortgage securities. Their mortgage bond accounts at corporate credit unions hold just $4.7 billion. That's less than 3% of all mortgage securities outstanding, but it's a tad over 10% of corporate credit unions' investment portfolios.

Plenty of savvy buyers, including pension funds and mutual funds, stand ready to step into the small void a credit union pullback would create, Ms. Lowell said.

Nevertheless, critics of the NCUA's plan are troubled by what they say would be an extreme limitation.

Though details of the NCUA plan are still sketchy, the Bond Market Trade Association said it would ban outright investments in the more exotic mortgage securities, such as those backed by commercial loans. And it would tie permissible levels of investment in all other categories of mortgage securities to the corporate credit unions' earnings and capital base.

The limitations could do more harm than good by "imposing inappropriate standards" on credit unions, Mr. Miller said.


Prudential Securities has filled two posts its fixed-income group.

Paul Wang, a veteran mortgage analyst, has been tapped to direct quantitative research, including prepayment analyses. He recently joined Prudential from Merrill Lynch, where he was director of financial modeling. Earlier, he held a similar position at Lehman Brothers.

The firm has also wooed Loy Saguil, most recently a manager in the fixed-income division of Nomura Securities, to handle similar duties on Prudential's trading desk.

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