NCUA $3.85 billion mortgage securitization comes to market
The National Credit Union Administration is coming to market with about $3.85 billion of residential mortgage-backed securities through a negotiated sale led by Barclays Capital. The NCUA, which is the federal regulator for credit unions, said the notes will price Tuesday and are structured to mitigate liquidity and interest-rate risk. The offering furthers the NCUA plan to divest itself of about $50 billion of troubled assets it acquired upon taking a handful of credit unions into conservatorship. The RMBS come to market backed by the full faith and credit of the U.S. government. Earlier this week, the Federal Reserve, Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision gave the NCUA a letter confirming the federal backing for the notes. The securities have an initial guarantee for timely payment of interest and principle from the NCUA. The confirmation of the government backing enables the NCUA to offer the RMBS without first registering them with the Securities and Exchange Commission. The NCUA said its funding approach also allows it to avoid full-market losses on the legacy assets. In March, the FDIC completed the first sale of this type of government-backed RMBS with a $1.8 billion issue of bonds secured by loans from seven failed banks. Upon seizing three corporate credit unions a few weeks ago, NCUA chairman Debbie Matz said the regulator now holds about 98% of the troubled assets in the space. The NCUA will bring eight to 10 more RMBS sales to market over the next four to five months as it moves through the troubled assets. Write to Jason Philyaw.