SAN DIMAS, Calif. – WesCorp says over the past year it has been gearing up to start securitizing credit union loans. This would be a first for the corporate network. WesCorp Chief Investment Officer Bob Burrell said while it may not look needed now because of all the liquidity in the market, things will eventually change and WesCorp wants to be ready with this new program. "There's no sense trying to build it when you need it; there's a lead time," said Burrell. He said there would need to be about $200 to $300 million in loans to sell off publicly. It would probably take portfolios from about six or seven CUs to reach this volume. Dave Trinder, VP of ALM for WesCorp, said auto loans would probably be the most likely candidates for securitization as well as nonconforming home loans and home equity lines of credit. There's already such an efficient process for selling conforming mortgages on the secondary market, that there's no reason for WesCorp to get involved there. Burrell said you can't put a timeframe on when WesCorp will do its first deal because it will be driven by CUs' liquidity needs. WesCorp said there may be a misconception floating around that it already has specific CU portfolios lined up and ready to go based on an article that appeared in Asset-Backed Alert, a weekly newsletter that covers the world of securitization. The article claims that WesCorp has already identified $600 million of non-conforming home loans that would be among the first to be packaged for this new initiative. Burrell said that's not the case. WesCorp has obviously looked at the overall market for getting into securitization, but no deals are imminent as the industry is still flush with liquidity. Securitizing loans means giving investors a lot of information. Just as individual investors want a prospectus on a security, investors of these CU bonds are going to require detailed information on the loans' performance record, and also CUs in general and their underwriting standards. That means CUs will have to have detailed performance information on the loans in order to participate. Burrell said WesCorp can help with its sophisticated Lewtan system, a loan tracking system that is used by Ford Motor Credit and other large lenders. "It provides the ability to analyze the loan performance. Most credit union core processing systems don't do that," said Burrell. Trinder said not only will WesCorp have to provide information about the loans themselves and the CUs involved, but also the CU industry in general. He said CUs are relatively unknowns to many on The Street in this area. What these investors have to understand, said Trinder, is the special relationship CUs have with members. "That is important because it adds to the quality of the security," said Trinder. WesCorp was given the authority to offer securitization in an NCUA Board closed session on July 26, 2001. The board said WesCorp can purchase whole loans from CUs for the purpose of selling those loans, without recourse, to CUs and other entities. WesCorp and some other corporates have also been given waivers by NCUA to engage in loan participation. Loan participation powers are also included in the latest Part 704 proposal. Participation differs from securitizing loans because 10% of each loan participated must remain on the CU's books. Network Liquidity Acceptance Company – a U.S. Central subsidiary – has done a significant number of loan participation deals with CUs over the years. [email protected]

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