Fed and Other Regulators Say NCUA Notes Are No-Risk
The mortgage-backed securities from the conserved corporate credit unions that the NCUA is selling have 0% risk and are backed by the full faith and credit of the government, the Federal Reserve and three other regulators concluded.
Because the bonds are backed by the government, the regulators would "not object to a banking organization's assignment of a zero percent risk weight,'' according to the letter, signed by officials of the Fed, the FDIC , the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The letter was dated yesterday and released today.
The agency is trying to sell the residential mortgage-backed securities, which are bundled loans from the corporate credit unions that the agency recently placed into conservatorship.
The original value of the notes was about $50 billion but the resecuritizied notes--which the agency is trying to sell in a series of transactions--are expected to raise about $35 billion.
The first in a series of transactions, which is scheduled to take place in the next few months, includes securities valued at approximately $3.85 billion.