NCUA Eyes ‘Skin in the Game’ Rule on Loan Participations


The National Credit Union Administration this week proposed a handful of regulatory measures, including new rules on participations that would require residential originators to retain some of the loans they participate out.

Like what you see? Click here to sign up for a National Mortgage News free trial and daily newsletter to get the latest feature stories, news headlines, data, and in-depth analysis on the issues impacting the mortgage industry.

Originators of these loans would have to retain some of the original risk on their balance sheets, holding “skin in the game,” NCUA chairman Debbie Matz told 400 attendees of a credit union trade group meeting. “They cannot solely reap the rewards while exporting [out] all of the risk to other credit unions,” she said.

“Requiring originators to keep ‘skin in the game’ will provide a disincentive for the kinds of reckless behavior that puts the (National CU) Share Insurance Fund at risk,” she said.

The proposal comes as other banking regulators—but not NCUA—are crafting their own “skin in the game” rules requiring originators to retain at least 5% of the risk tied to high LTV mortgages securitized in the secondary market.

However, CUs that sell their loans into the secondary will have to comply with those new rules.

The NCUA proposal also would require new due diligence by participants, including proper review before — and throughout the life of a loan participation.

“It’s crucial for credit unions to be fully aware of the risks before they enter into participation agreements — and to monitor them closely,” said the NCUA chairman.

Daily Briefing | Wednesday, September 21, 2011

  • Federal Reserve Back in the MBS Buying Game

    The Federal Reserve Wednesday afternoon revealed that it will start purchasing agency MBS once again as a way to help support the mortgage market.

  • Surprise: Homes Sales Jump, Investors Active

    Sales of existing single-family homes jumped 8.5% in August despite hurricane weather in the Northeast, igniting hopes that the long beleaguered housing market could be coming up for air.

  • Final 2Q Production Tally: Worst Quarter Since 4Q08

    Mortgage bankers originated $291 billion of residential loans in the second quarter — the industry’s worst performance since the height of the housing crisis almost three years ago, according to exclusive survey figures compiled by National Mortgage News and the Quarterly Data Report.

  • FHA Production Rises in August, But Lags for the Year

    Demand for Federal Housing Administration single-family loans rose in August with lenders funding $17.4 billion of government-backed product, an 8% increase from the prior month.

  • Nation’s Largest ‘Private Money’ Servicer Gets FHA, Freddie Approvals

    FCI Lender Services, the nation’s largest servicer of privately held mortgages, has received final servicing approval from the Federal Housing Administration.

  • Applications Continue to Rise, but Ever So Slightly

    Mortgage applications rose by just under 1% on a seasonally adjusted basis for the week ending September 16 with refinancings gaining steam, according to new figures compiled by the Mortgage Bankers Association.

  • Florida Court Rules Computer Records ‘Inadmissible’ in Foreclosure Cases

    A Florida court ruling could make it harder for mortgage servicers to use computer records as evidence for foreclosure without verifying the underlying information.

  • Helping Lenders Get Data From Consumers Who Don’t Want to Share

    Consumers are sharing more personal information online than ever — but they don’t want to share it with their mortgage lenders and banks.

  • Rep. Capito: GOP Faces Schism Over GSEs

    A top Republican on the House Financial Services Committee said Tuesday she is disappointed that the GOP has not been able to fix Fannie Mae and Freddie Mac since taking control of the House in January.

  • California Home Sales Poised for Meager Growth

    Home sales in California, the largest single-family market in U.S., are likely to rise 1% in 2012 after being essentially flat this year, according to a new forecast from the California Association of Realtors.

Leave a Reply