Deputy Executive Director Larry Fazio said the basic plan for legacy assets is to isolate and fund them. In order to separate the targeted investments from corporates, they must somehow be funded by another source, and he said NCUA is exploring various ways to do that.

The FDIC's structured note program is one strategy the regulator is considering, he said. Another option is to obtain market-based funding that would allow the NCUA to hold the investments and absorb only additional credit losses rather than face "the greater expense of selling into the marketplace."

One big challenge the NCUA faces is determining to what extent legacy assets can be isolated from corporates before incurring losses based on market value, Fazio said. Additionally, the NCUA wants to ensure if legacy assets suffer any further losses, they are covered by what remains of contributed member capital before putting the share insurance fund at further risk.

When asked to define legacy assets, Fazio said they will include investments that may not suffer any losses but "would be out of compliance with regulatory reform." The legacy assets plan will encompass both issues, he said, referring to both corporate investment losses and new Part 704 regulations.

Matz said she currently anticipates releasing final corporate regulations in September and no additional comment period will follow. General Counsel Bob Fenner said the NCUA's third-party analysis of whether corporates can meet proposed retained earnings requirements is nearly complete, and the results will factor into NCUA's final rule. Fenner said the NCUA may make the results of the study public before releasing final regs in September.

Matz also announced her team will release an official letter to credit unions the week of July 5 that will outline how the NCUA selects merger partners for struggling credit unions. Matz said the agency has received feedback asking for more transparency regarding the process. In addition to the letter, Matz said NCUA also hopes to create a registry of merger candidates by early next year, so regional staff can solicit interested and eligible credit unions.

Melinda Love, director of the office of examination and insurance, addressed share insurance fund assessments. She said the NCUA is looking into whether the agency will price its fall assessment to bring the fund back to 1.3% net worth or lower.

"It depends upon the trends we're seeing in credit unions, in terms of migration to lower CAMEL ratings, the failure rate, specific reserves and share growth," Love said. "All will be taken into consideration as staff makes recommendations to the board as to where we need to land to proactively deal with our problems going forward."

Matz added that NCUSIF net worth dropped from 1.24% to 1.2% in just one month. "Even though we had aimed to reach 1.3% this year, we're at 1.2% because of anticipated losses, so we want to be conservative and not fall to a level that would adversely impact credit unions," she said.

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