Quiero saber acerca de...

72812

Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations
an FCU be determined using the total amount of MSRs purchased by the FCU
or, alternatively, the aggregate amount of MSRs purchased from other parties and MSRs retained after the sale of the underlying mortgage loans by the FCU?
Should the rule limit the total amount of MSRs that an FCU may hold to no more than 25 percent of the FCUs net worth or would another standard, such as a concentration limit based on assets, be more appropriate to address concentration risk?
Liquidity Risk: To address the liquidity risk of the purchasing FCU, should the final rule limit the amount of months an FCU is obligated to remit payments to the mortgage loan owner if the borrower fails to make payments?
Specifically, should there be a maximum of three to six months of payments made to the mortgage loan owner when a borrower fails to make payment on the serviced mortgage loan?
In addition to the questions listed, the Board also solicited comment on whether the safeguards and limitations applicable to FCUs in the final rule should be extended to all FICUs in light of the risks associated with the purchase of MSRs, as a requirement for obtaining and maintaining federal share insurance.
II. Final Rule
jspears on DSK121TN23PROD with RULES1

The final rule removes the prohibition on FCUs from purchasing MSRs under the Investment Rule.16 The final rule also removes the current defined term mortgage servicing rights in the Investment Rule and replaces it with the term mortgage servicing assets. For consistency with part 702, the final rule adopts the same definition for mortgage servicing assets that the Board adopted under its amendments to the risk-based capital RBC rule.17
Under the RBC rule, MSAs are defined as assets, maintained in accordance with GAAP, resulting from contracts to service loans secured by real estate that have been securitized or owned by others for which the benefits of servicing are expected to more than adequately compensate the servicer for performing the servicing. 18 This alignment in the final rule does not make substantive definitional changes to terms that are commonly used 16 The Board did not propose in the NPR to remove any investment restrictions applicable to federally insured corporate credit unions under part 704. This final rule, therefore, does not alter the distinct investment authorities and prohibitions applicable to corporate credit unions under part 704.
17 80 FR 66626 Oct. 29, 2015 and 84 FR 68781
Dec. 17, 2019.
18 12 CFR 702.2 effective Jan. 1, 2022.

VerDate Sep<11>2014

20:16 Dec 22, 2021

Jkt 256001

interchangeably by industry and regulators, but rather ensures uniformity and clarity in the regulatory text for compliance with both the investment and capital rules.19
The final rule amends 703.14 to explicitly permit an FCU to purchase MSAs from other FICUs, provided:
1 After the last full examination of the credit union, the FCU received a composite CAMELS rating of 1 or 2, which also included a Management rating of 1 or 2; 20
2 The underlying mortgage loans of the MSAs are loans the FCU is empowered to grant;
3 The FCU purchases the MSAs within the limitations of the FCUs board of directors written purchase policies; and 4 The board of directors or the FCUs investment committee approves the purchase in advance.

The Board notes that under recent amendments to the RBC rule, complex credit unions with MSAs will also factor the criteria in 702.104 to calculate their RBC requirements.21
The final rule removes the current prohibition against MSR purchases imposed in 703.16a and reserves the paragraph to correspond to the change in 703.14. The remaining provision in 703.16a, which recognizes an FCUs incidental powers authority to service the loans owned by a member engaged in mortgage lending, is transferred to part 721 as another example of loanrelated product. While loan servicing is an incidental powers activity when performed for other credit unions under 721.3c as a correspondent service, the addition to paragraph h reflects the authority found in 703.16a to provide loan-related services to members.
III. Legal Authority Over decades, the NCUA has issued many regulations and opinions recognizing the authority of an FCU to engage in loan servicing activities. Since 1979, an FCU has been permitted to service any eligible obligation it purchases or sells in whole or in part under the NCUAs eligible obligations rule.22 FCUs also have the authority to provide correspondent services, including loan servicing, to other credit unions under the incidental powers 19 See Comptrollers Handbook for Mortgage Banking, version 1 Feb. 2014 at p. 64, fn.4; 86 FR
45824, 45846 Aug. 16, 2021.
20 Effective April 1, 2022, the NCUAs supervisory rating system will change from CAMEL
to CAMELS. See 86 FR 59282 Oct. 27, 2021.
CAMEL ratings will be used to determine eligibility for those credit unions that do not have a CAMELS
rating.
21 80 FR 66626 Oct. 29, 2015 and 84 FR 68781
Dec. 17, 2019. On December 16, 2021, the Board approved additional amendments to 12 CFR
702.104 pertaining to mortgage servicing assets.
22 12

PO 00000

CFR 701.23e; 44 FR 27068 May 9, 1979.

Frm 00034

Fmt 4700

Sfmt 4700

regulation.23 In adopting that regulation, the Board observed: Correspondent services are services or functions provided by an FCU to another credit union that the FCU is authorized to perform for its own members or as part of its operation. 24 During the part 721
rulemaking in 2001, the Board agreed with commenters that loan servicing and escrow services were examples of permitted correspondent services.25
Furthermore, although the purchase of MSRs was prohibited under the Investment Rule, the Board recognized during the incidental powers rulemaking that an FCU could perform servicing for a member engaged in making mortgage loans as a financial service to its member:
For this activity to be permissible as a financial service to a member, the member must continue to own the loan during the time that the credit union provides servicing.
In this context, the NCUA Board concludes that providing mortgage servicing is an appropriate exercise of a credit unions incidental powers to provide financial service to a member. 26

Therefore, the authority to provide mortgage loan servicing as a financial service to members, under the conditions above, has been in place since 2003.27 FCUs are also permitted to provide mortgage loan servicing to others as a charitable contribution.28
Further, under the NCUAs Credit Union Service Organization CUSO
regulation, CUSOs 29 are expressly preapproved to provide loan support services, including loan servicing and debt collection services.30
The authority for FCUs to purchase MSAs is found in Section10714 of the Act, which permits an FCU to sell all or a part of its assets to another credit union and to purchase all or part of the assets of another credit union . . .
subject to regulations of the Board. 31
Given that MSAs are financial assets 23 12

CFR 721.3c.
FR 40845, 40850 Aug. 6, 2001.
25 Id.; see also NCUA OGC Opinion 090430
August 2009 available at https www.ncua.gov/
regulation-supervision/legal-opinions/2009/
nonmember-loan-servicing.
24 66

26 67

FR 78996, 78998 Dec. 27, 2002.
FR 32960 June 3, 2003.
28 NCUA OGC Opinion 010502 June 18, 2001
available at https www.ncua.gov/files/legalopinions/OL2001-0502.pdf; 12 CFR 721.3b1.
29 Generally, a CUSO is an entity in which a FICU
has an ownership interest or to which a FICU has extended a loan, and that entity is engaged primarily in providing products or services to credit unions or credit union members. A CUSO also includes any entity in which a CUSO has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members. See 12
CFR 712.1d.
30 12 CFR 712.5h; 712.3d5iA.
31 12 U.S.C. 175714.
27 68

E:FRFM23DER1.SGM

23DER1