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ALEXANDRIA, Va.-Navy Federal Credit Union may continue to invest in Navy Federal Financial Group, a credit union service organization solely owned by the institution, after it begins offering credit enhancements on certain mortgage loans. According to NCUA Associate General Counsel Sheila Albin’s Feb. 6 legal opinion letter (03-0105), the credit enhancements NFFG plans to get involved in are preapproved as an activity under the “loan support services” category in the CUSO rule. However, while legal, the attorney suggested that Navy Federal consult their region in case of safety and soundness concerns. Albin’s letter explained that Navy Federal President and CEO Brian McDonnell wrote that the credit enhancement program would benefit credit unions and their members through higher secondary market pricing for their loans and easier sales and allowing credit unions to offer more flexible mortgage products at lower rates with better terms. Under the program, NFFG would agree to sell credit unions’ and CUSOs’ mortgages on the secondary market and accept a portion of the default risk. In return, NFFG receives a portion of the interest from the loan. Additionally, the secondary market investor will pay the selling credit union or CUSO a higher price in exchange for the enhancement. NFFG would only offer credit enhancements on loans originated, purchased or serviced by Navy’s subsidiaries, credit unions or CUSOs approved for the program.

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