National Credit Union Administration EASILY launches $3.85B Securitization; more to come

With a little bit a fanfare, the National Credit Union Administration, together with Barclays Capital, yesterday announced the pending sale of a nearly US$4 Billion securitization of mortgage loans, which are part of nearly US$50 Billion in loans and securities that the agency has assumed since April of this year, in connection with its rescue of failed US credit unions.

The issue represents just the first of 8-10 issues the NCUA plans to launch over the next several months as it disposes of what it now projects to be 98% of the problem assets formerly held by credit unions under its jurisdiction.

So you might say, great but what’s the news here?

We just wanted to point out that even though these are distressed loans, the speed with which this structure has been placed (a matter of weeks) is pretty remarkable.  The backing of the “full faith and credit of the US Gov’t” is undoubtedly a significant factor in the expectation that these notes will be gobbled up by investors.  However, let’s keep in mind that the structure is a “securitization” and the structuring features are none other than those tried and tested methods that have been used to great success for more than 20 years.  No real innovation here!

In fact, that’s just our point!  Investors will easily understand what to expect from these securities, including what happens if something goes wrong.  Wouldn’t it be novel if issuers and investors in the private asset-backed and mortgage-backed markets had as much “faith” for their respective obligations and rights in their “non-government” market!

Of course, government officials at the NCUA, FDIC and other agencies are too busy patting themselves on the back to notice that they are using the same structuring technologies that they are essentially shutting off in the private markets by instilling little to no confidence in either issuers or investors that the quagmire of new laws and regulations they have mandated to “fix” securitization will #1 work and #2 not continue to shift under their feet.

About markferraris
Managing Principal Orchard Street Partners LLC

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