The National Credit Union Administration (NCUA) is weighing the possibility of issuing securities backed by $50 billion of MBS that belonged to failed corporate credit unions.
At press time, details were sketchy but NCUA chief examiner Melinda Love confirmed the plans to Credit Union Journal, a sister publication to National Mortgage News.
The face value of the MBS is $50 billion which means the securities issued would be for a lesser amount. Corporate CUs are large wholesale lenders to small retail CUs.
Investment bankers familiar with NCUA's plan said the agency is consulting with both the Treasury Department and the Federal Deposit Insurance Corp. on the process.
"It's unclear whether this will be a 're-REMIC' or some other structure," said one advisor. Also, the NCUA likely would issue several smaller bonds and not one or two large securities.
Senior NCUA executives expect bonds held by the corporates (mostly MBS) will continue to deteriorate in value as mortgage foreclosures rise and unemployment remains at high levels.