The NCUA is currently considering amendments to Part 703, the investment regulation. NCUA has not yet issued proposed changes. If you agree that the following idea is worth including in the investment regulation, I ask you to express your support to the NCUA.

Many credit unions are at risk due to the inability to earn sufficient net income to pay the assessments for the share insurance fund and to rebuild capital that was lost due to the corporate credit unions collapse, the real estate crash and the continuing crisis of confidence by consumers. The permissible investment options provide anemic returns. Credit unions have to chase loan yield to survive in the long term. How do credit unions with low loan demand safely earn loan yield?

I have advocated for the NCUA to permit credit unions to buy shares in a registered mutual fund consisting of credit union loans. The mutual fund will consist only of credit union loans and some cash or cash equivalent assets for redemption purposes. The fund will be registered with the SEC. The fund will only buy loans that meet its underwriting criteria. The loans will be underwritten and serviced by credit unions that have passed a vigorous certification process by the fund manager. Certified credit union lenders will demonstrate a high level of lending expertise in the types of loans sold and a successful history of lending. Loan purchases will also have to be approved by the fund manager. The portfolio will be reviewed periodically by a third party for quality control purposes. The portfolio will be reviewed daily by a nationally known company that will provide a daily value of the fund's assets that will enable the fund to be traded daily. The fund will have channels to sell loans if liquidity is needed or nonperforming loans have to be removed from the fund. The loan documents for loans held in the fund will be stored electronically and accessible remotely by the fund shareholders and regulators. If the fund manager sees a pattern of defaults (geographically, by lender or type of loan) the fund manager can take mitigating steps quickly to stem losses.

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