The partisan divisions on the National Credit Union Administration board came to the forefront Thursday, as Republican members of the board voted to bring three contentious final rules to the board over the objection of Democratic board Chairman Todd Harper.
GOP board members Rodney Hood and Kyle Hauptman voted to force a rule governing the activities of Credit Union Service Organizations onto the October agenda. They voted to force a rule governing service facilities onto the November agenda and they voted to force a rule governing the purchase of mortgage servicing rights by credit unions onto the December agenda.
“We should consider these final rules and let the board work its will,” Hood said, adding that the board may be able to reach a consensus on some of the issues.
“It goes without saying that there are a lot of significant issues facing this board,” Hauptman said, supporting the move. “As a result, focus is almost a luxury. But getting caught up in urgent items at the expense of important items is a trap we must avoid.”
Harper made it clear that as they were first proposed, he continues to oppose the rules. “My policy views on these issues have not changed,” he said. He added, however, that he does not view the Republican board members’ actions as contentious.
He said he remains opposed to the CUSO rule, which would allow CUSOs to originate any loan that federal credit unions may make. “We would be abdicating our responsibilities,” Harper said, adding that the agency does not have power to supervise third-party vendors.
He said the second rule, a plan that would include any shared branch ATM or shared electronic facility in the definition of “service facility” for Multiple Common Bond federal credit unions that participate in a shared branching network, violates federal law as written. He said that he might be able to support the rule if it is rewritten.
Harper said he is confident that the board can reach a consensus on a proposed rule to allow federal credit unions to purchase mortgage servicing rights from other federally insured credit unions.
Also, during the board meeting, NCUA staff reported that in June, the agency’s equity ratio stood at 1.23%, up from 1.22% during the previous quarter. The equity ratio is projected to increase to 1.28% by the end of the year. The agency’s normal operating level stands at 1.38%, so the 1.28% is still below the normal operating level.
Harper said that the agency must continue to monitor economic conditions, adding that the impact of the pandemic has not yet been fully felt. That could affect the equity ratio in the coming months, he said.
Hood said he would favor lowering the normal operating level to 1.30% and said the agency should discuss that at the November or December meeting. He also said that the NCUA board should reevaluate the agency’s investment strategy. “This has been especially relevant as we have seen fluctuations in Treasury yields since the start of the pandemic,” he said.
Hood also questioned whether the agency’s investment strategy has been made public. Eugene Schied, the agency’s Chief Financial Officer, said he just learned that it is not public and that he will consult with agency staff about whether it should be made public.
Hauptman said he was pleased that the agency had not acted prematurely to take action to increase the equity ratio. “That said, I have to admit that it’s indisputably uncomfortable for the Fund to again be so close to our lower limit of 1.20%,” he said.
In other action, the board approved a plan to use a $15 million budget surplus to hire three cybersecurity experts, three staff members in the Office of Ethics Counsel and one staff member for the board secretary’s office. The surplus largely was the result of decreased travel expenses for NCUA staff who did not travel during the pandemic.
Hood said that while he supports the new positions, he expects staff to develop a budget that controls costs and “gives funds back to credit unions in some form.” He also said the 2022 budget must contain a comprehensive examination of the agency’s Operating Fund.
The board also approved a proposed subordinated debt rule that would amend the definition of “Grandfathered Secondary Capital” to include any secondary capital issued to the federal government. NCUA staff said the proposed change would benefit eligible low-income credit unions that are either participating in the Treasury Department’s Emergency Capital Investment Program or other programs administered by the U.S. Government that can be used to fund secondary capital, if they do not receive the funds for such programs by Dec. 31, 2021.
The board also voted to allow the Oregon Department of Consumer and Business Services to implement its own member business loan rule.