Corporate America's Legacy Asset Solution Is Liquidation
Corporate America Credit Union President/CEO Thomas Bonds expects to sell the last of his private-label mortgage-backed securities by September, around the time NCUA will release its legacy assets plan that will separate such investments from corporate balance sheets.
"Because of the way we have repositioned our portfolio, we're not concerned about NCUA coming in and having us involuntarily surrender investments," he said. Bonds confirmed that after the last private-label MBS is sold, no investments will remain on the $3.2 billion institution's books that aren't allowed under proposed corporate regulations.
Bonds credited his ability to liquidate toxic assets to a 1999 decision that reduced portfolio credit risk. Back then, 85% of Corporate America's investment portfolio would be considered toxic. That was reduced to 10% by the time the financial crisis hit, he said, and Corporate America "didn't buy support pieces."
Corporate America stuck to four guidelines when buying securities: underlying collateral borrowers must have average FICO scores of 700 or greater; the weighted average loan-to-value must be 80% or less; no support pieces; and no mezzanine or low positions.