New Secondary Market for CU Loans

Credit Union Journal
March 22, 2005

ALEXANDRIA, Va. (03/18/05)—The NCUA Board approved Thursday CUNA Mutual Group's plan to create a new secondary market for member business loans by buying loans from credit unions, then selling shares in funds comprised of pools of the loans.

CUNA Mutual plans to develop additional funds under the program, called CU System Funds, by purchasing credit card, car, mortgage, community development and other types of loans, according to Kevin Thompson, vice president for the company's Financial Solutions Group.

The first fund, which CUNA Mutual has capitalized with $25 million, will buy member business loans and is projected to grow to as much as $1 billion in the first three years. The company has already purchased $1 million of MBLs from one credit union and has commitments to buy more from several others. CUNA Mutual plans to buy credit card receivables from the new credit card bank it chartered, known as Union Financial, and acquire business loans from participants in its MEMBERS Business Solutions.

The main aim is to expand credit union liquidity by providing a new secondary market, while increasing investment options for credit unions, according to Thompson. "This will help keep good credit union-originated assets within the system and allow other credit unions to benefit," says Thompson.
This article was first published in Credit Union Journal and is reprinted with permission.