CUNA Comment Letter

NCUA’s Interim Final Rule on Prepayment Fees to Federal Home Loan Banks (Part 709)

April 24, 2001

Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Dear Ms. Baker:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on NCUA’s interim final rule on prepayment fees to Federal Home Loan Banks (FHLBs). The interim final rule will clarify that the NCUA Board, as conservator or liquidating agent of a federally-insured credit union, will honor a claim for prepayment fees by an FHLB. This will apply to such fees described in a written contract, provided that: 1) the fee does not exceed the present value of the economic loss suffered by the FHLB; and 2) the collateral is sufficient to pay in full the principal and interest due on secured advances and the applicable prepayment fee. CUNA represents more than 90 percent of our nation’s 10,400 state and federal credit unions.

CUNA strongly supports the interim final rule. Certain credit unions have experienced difficulties in obtaining long-term advances from FHLBs because of the risk that the NCUA Board, as conservator or liquidating agent, would not honor claims for prepayment fees. The interim rule will eliminate this concern and will result in greater access to long-term FHLB advances. This will allow credit unions to reduce their borrowing costs. The savings that result will allow these credit unions to meet the needs of their members and communities more effectively.

CUNA also believes that NCUA, as liquidating agent or conservator, should honor a claim by a corporate credit union for prepayment fees to the same extent as claims by a Federal Home Loan Bank. We believe NCUA has the authority to authorize such actions, as described in the comment letter that has been filed by the Association of Corporate Credit Unions.

Thank you for the opportunity to comment on NCUA’s interim final rule on prepayment fees to FHLBs. If Board members or agency staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at 202-682-4200.

Sincerely,

Jeffrey Bloch
Assistant General Counsel