12 Cfr 709.9 (1-1-21 Ed)

§ 709.9

12 CFR Ch. VII (1–1–21 Edition)

(g) Period for filing or renewing suit.
Any claimant who files a request for
expedited relief shall be permitted to
file a suit, or to continue a suit filed
before the appointment of the liquidating agent, seeking a determination
of the claimant’s rights with respect to
its security interest after the earlier
of:
(1) The end of the 90-day period beginning on the date of the filing of a request for expedited relief; or
(2) The date the Board denies all or
part of the claim.
(h) Statute of limitations. If an action
described in paragraph (g) of this section is not filed, or the motion to
renew a previously filed suit is not
made, before the end of the 30-day period beginning on the date on which
such action or motion may be filed in
accordance with paragraph (g) of this
section, the claim shall be deemed to
be disallowed as of the end of such period (other than any portion of such
claim that was allowed by the Board).
Such disallowance shall be final and
the claimant shall have no further
rights or remedies with respect to such
claim.

kpayne on VMOFRWIN702 with $$_JOB

[56 FR 56925, Nov. 7, 1991, as amended at 59
FR 36041, July 15, 1994; 75 FR 34621, June 18,
2010. Redesignated at 82 FR 50294, Oct. 30,
2017; 85 FR 62213, Oct. 2, 2020]

§ 709.9 Treatment of financial assets
transferred in connection with a
securitization or participation.
(a) Definitions.
Financial asset means cash or a contract or instrument that conveys to
one entity a contractual right to receive cash or another financial instrument from another entity.
Investor means a person or entity
that owns an obligation issued by an
issuing entity.
Issuing entity means an entity that
owns a financial asset or financial assets transferred by the sponsor and
issues obligations supported by such
asset or assets. Issuing entities may include, but are not limited to, corporations, partnerships, trusts, and limited
liability companies and are commonly
referred to as special purpose vehicles
or special purpose entities. To the extent a securitization is structured as a
multi-step transfer, the term issuing

entity would include both the issuer of
the obligations and any intermediate
entities that may be a transferee. Notwithstanding the foregoing, a Specified
GSE or an entity established or guaranteed by a Specified GSE does not
constitute an issuing entity.
Monetary default means a default in
the payment of principal or interest
when due following the expiration of
any cure period.
Obligation means a debt or equity (or
mixed) beneficial interest or security
that is primarily serviced by the cash
flows of one or more financial assets or
financial asset pools, either fixed or revolving, that by their terms convert
into cash within a finite time period,
or upon the disposition of the underlying financial assets, and by any
rights or other assets designed to assure the servicing or timely distributions of proceeds to the security holders issued by an issuing entity. The
term may include beneficial interests
in a grantor trust, common law trust
or similar issuing entity to the extent
that such interests satisfy the criteria
set forth in the preceding sentence, but
does not include LLC interests, partnership interests, common or preferred
equity, or similar instruments evidencing ownership of the issuing entity.
Participation means the transfer or
assignment of an undivided interest in
all or part of a financial asset, that has
all of the characteristics of a ‘‘participating interest,’’ from a seller, known
as the ‘‘lead,’’ to a buyer, known as the
‘‘participant,’’ without recourse to the
lead, pursuant to an agreement between the lead and the participant.
‘‘Without recourse’’ means that the
participation is not subject to any
agreement that requires the lead to repurchase the participant’s interest or
to otherwise compensate the participant upon the borrower’s default on the
underlying obligation.
Securitization means the issuance by
an issuing entity of obligations for
which the investors are relying on the
cash flow or market value characteristics and the credit quality of transferred financial assets (together with
any external credit support permitted
by this section) to repay the obligations.

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National Credit Union Administration

§ 709.9

Servicer means any entity responsible
for the management or collection of
some or all of the financial assets on
behalf of the issuing entity or making
allocations or distributions to holders
of the obligations, including reporting
on the overall cash flow and credit
characteristics of the financial assets
supporting the securitization to enable
the issuing entity to make payments
to investors on the obligations. The
term ‘‘servicer’’ does not include a
trustee for the issuing entity or the
holders of obligations that makes allocations or distributions to holders of
the obligations if the trustee receives
such allocations or distributions from
a servicer and the trustee does not otherwise perform the functions of a
servicer.
Specified GSE means each of the following:
(1) The Federal National Mortgage
Association and any affiliate thereof;
(2) Federal Home Loan Mortgage Corporation and any affiliate thereof;
(3) The Government National Mortgage Association; and
(4) Any Federal or State sponsored
mortgage finance agency.
Sponsor means a person or entity
that
organizes
and
initiates
a
securitization by transferring financial
assets, either directly or indirectly, including through an affiliate, to an
issuing entity, whether or not such
person owns an interest in the issuing
entity or owns any of the obligations
issued by the issuing entity.
Transfer means:
(1) The conveyance of a financial
asset or financial assets to an issuing
entity; or
(2) The creation of a security interest
in such asset or assets for the benefit
of the issuing entity.
(b) Coverage. This section applies to
securitizations that meet the following
criteria:
(1) Capital structure and financial assets. The documents creating the
securitization must define the payment
structure and capital structure of the
transaction.
(i) Requirements applicable to all
securitizations. (A) The securitization
may not consist of re-securitizations of
obligations or collateralized debt obligations unless the documents creating

the securitization require that disclosures required in paragraph (b)(2) of
this section are made available to investors for the underlying assets supporting the securitization at initiation
and while obligations are outstanding;
and
(B) The documents creating the
securitization must require that payment of principal and interest on the
securitization obligation will be primarily based on the performance of financial assets that are transferred to
the issuing entity and, except for interest rate or currency mismatches between the financial assets and the obligations, will not be contingent on market or credit events that are independent of such financial assets. The
securitization may not be an unfunded
securitization or a synthetic transaction.
(ii) Requirements applicable only to
securitizations in which the financial assets include any residential mortgage
loans. (A) The capital structure of the
securitization must be limited to no
more than six credit tranches and cannot include ‘‘sub-tranches,’’ grantor
trusts or other structures. Notwithstanding the foregoing, the most senior
credit tranche may include time-based
sequential pay or planned amortization
and companion sub-tranches; and
(B) The credit quality of the obligations cannot be enhanced at the issuing
entity or pool level through external
credit support or guarantees. However,
the credit quality of the obligations
may be enhanced by credit support or
guarantees provided by Specified GSEs
and the temporary payment of principal and/or interest may be supported
by liquidity facilities, including facilities designed to permit the temporary
payment of interest following appointment of the NCUA Board as conservator or liquidating agent. Individual
financial assets transferred into a
securitization may be guaranteed, insured, or otherwise benefit from credit
support at the loan level through mortgage and similar insurance or guarantees, including by private companies,
agencies or other governmental entities, or government-sponsored enterprises, and/or through co-signers or
other guarantees.

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§ 709.9

12 CFR Ch. VII (1–1–21 Edition)

(2) Disclosures. The documents must
require that the sponsor, issuing entity, and/or servicer, as appropriate, will
make available to investors, information describing the financial assets, obligations, capital structure, compensation of relevant parties, and relevant
historical performance data set forth
in this paragraph (b)(2).
(i) Requirements applicable to all
securitizations. (A) The documents must
require that, on or prior to issuance of
obligations and at the time of delivery
of any periodic distribution report and,
in any event, at least once per calendar
quarter, while obligations are outstanding, information about the obligations and the securitized financial assets will be disclosed to all potential
investors at the financial asset or pool
level and security level, as appropriate
for the financial assets, to enable evaluation and analysis of the credit risk
and performance of the obligations and
financial assets. The documents must
require that such information and its
disclosure, at a minimum, complies
with the requirements of Securities
and Exchange Commission Regulation
AB, or any successor disclosure requirements for public issuances, even if
the obligations are issued in a private
placement or are not otherwise required to be registered. Information
that is unknown or not available to the
sponsor or the issuer after reasonable
investigation may be omitted if the
issuer includes a statement in the offering documents disclosing that the
specific information is otherwise unavailable.
(B) The documents must require
that, on or prior to issuance of obligations,
the
structure
of
the
securitization and the credit and payment performance of the obligations
will be disclosed, including the capital
or tranche structure, the priority of
payments, and specific subordination
features; representations and warranties made with respect to the financial
assets, the remedies for, and the time
permitted for cure of any breach of representations and warranties, including
the repurchase of financial assets, if
applicable; liquidity facilities and any
credit enhancements permitted by this
rule, any waterfall triggers, or priority
of payment reversal features; and poli-

cies governing delinquencies, servicer
advances, loss mitigation, and writeoffs of financial assets.
(C) The documents must require that
while obligations are outstanding, the
issuing entity will provide to investors
information with respect to the credit
performance of the obligations and the
financial assets, including periodic and
cumulative financial asset performance
data, delinquency and modification
data for the financial assets, substitutions and removal of financial assets,
servicer advances, as well as losses
that were allocated to such tranche
and remaining balance of financial assets supporting such tranche, if applicable, and the percentage of each
tranche
in
relation
to
the
securitization as a whole.
(D) In connection with the issuance
of obligations, the documents must disclose the nature and amount of compensation paid to the originator, sponsor, rating agency or third-party advisor, any mortgage or other broker, and
the servicer(s), and the extent to which
any risk of loss on the underlying assets is retained by any of them for such
securitization
be
disclosed.
The
securitization documents must require
the issuer to provide to investors while
obligations
are
outstanding
any
changes to such information and the
amount and nature of payments of any
deferred compensation or similar arrangements to any of the parties.
(ii) Requirements applicable only to
securitizations in which the financial assets include any residential mortgage
loans. (A) Prior to issuance of obligations, sponsors must disclose loan level
information about the financial assets
including, but not limited to, loan
type, loan structure (for example, fixed
or adjustable, resets, interest rate
caps, balloon payments, etc.), maturity, interest rate and/or Annual Percentage Rate, and location of the property.
(B) Prior to issuance of obligations,
sponsors must affirm compliance in all
material respects with applicable statutory and regulatory standards for the
underwriting and origination of residential mortgage loans. Sponsors must

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National Credit Union Administration

§ 709.9

disclose a third-party due diligence report on compliance with such standards and the representations and warranties made with respect to the financial assets.
(C) The documents must require that
prior to issuance of obligations and
while obligations are outstanding,
servicers will disclose any ownership
interest by the servicer or an affiliate
of the servicer in other whole loans secured by the same real property that
secures a loan included in the financial
asset pool. The ownership of an obligation, as defined in this regulation, does
not constitute an ownership interest
requiring disclosure.
(3) Documentation and recordkeeping.
The
documents
creating
the
securitization must specify the respective contractual rights and responsibilities of all parties and include the requirements described in paragraph
(b)(3) of this section and use as appropriate any available standardized documentation for each different asset
class.
(i) Requirements applicable to all
securitizations. The documents must define the contractual rights and responsibilities of the parties, including but
not limited to representations and warranties and ongoing disclosure requirements, and any measures to avoid conflicts of interest; and provide authority
for the parties, including but not limited to the originator, sponsor,
servicer, and investors, to fulfill their
respective duties and exercise their
rights under the contracts and clearly
distinguish between any multiple roles
performed by any party.
(ii) Requirements applicable only to
securitizations in which the financial assets include any residential mortgage
loans. (A) Servicing and other agreements must provide servicers with authority, subject to contractual oversight by any master servicer or oversight advisor, if any, to mitigate losses
on financial assets consistent with
maximizing the net present value of
the financial asset. Servicers shall
have the authority to modify assets to
address reasonably foreseeable default,
and to take other action to maximize
the value and minimize losses on the
securitized financial assets. The documents shall require that the servicers

apply industry best practices for asset
management and servicing. The documents shall require the servicer to act
for the benefit of all investors, and not
for the benefit of any particular class
of investors, that the servicer maintain
records of its actions to permit full review by the trustee or other representative of the investors and that the
servicer must commence action to
mitigate losses no later than ninety
(90) days after an asset first becomes
delinquent unless all delinquencies
have been cured, provided that this requirement will not be deemed to require that the documents include any
provision concerning loss mitigation
that requires any action that may conflict with the requirements of Regulation X (12 CFR part 1024), as Regulation
X may be amended or modified from
time to time.
(B) The servicing agreement may not
require a primary servicer to advance
delinquent payments of principal and
interest for more than three payment
periods, unless financing or reimbursement facilities are available, which
may include, but are not limited to,
the obligations of the master servicer
or issuing entity to fund or reimburse
the primary servicer, or alternative reimbursement facilities. Such ‘‘financing or reimbursement facilities’’ under
this paragraph may not be dependent
for repayment on foreclosure proceeds.
(4) Compensation. The following requirements
apply
only
to
securitizations in which the financial
assets include any residential mortgage loans. Compensation to parties involved in the securitization of such financial assets must be structured to
provide incentives for sustainable credit and the long-term performance of
the financial assets and securitization
as follows:
(i) The documents must require that
any fees or other compensation for
services payable to credit rating agencies or similar third-party evaluation
companies are payable, in part, over
the five-year period after the first
issuance of the obligations based on
the performance of surveillance services and the performance of the financial assets, with no more than sixty
percent of the total estimated compensation due at closing; and

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§ 709.9

12 CFR Ch. VII (1–1–21 Edition)

(ii) The documents must provide that
compensation to servicers will include
incentives for servicing, including payment for loan restructuring or other
loss mitigation activities, which maximizes the net present value of the financial assets. Such incentives may include payments for specific services,
and actual expenses, to maximize the
net present value or a structure of incentive fees to maximize the net
present value, or any combination of
the foregoing that provides such incentives.
(5) Origination and retention requirements—(i) Requirements applicable to all
securitizations. For any securitization,
the
documents
creating
the
securitization shall require retention
of an economic interest in the credit
risk of the financial assets in accordance with the regulations required
under Section 15G of the Securities Exchange Act, 15 U.S.C. 78a et seq., added
by Section 941(b) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, including restrictions on
sale, pledging and hedging set forth
therein.
(ii) Requirements applicable only to
securitizations in which the financial assets include any residential mortgage
loans. (A) The documents must require
the establishment of a reserve fund
equal to at least five (5) percent of the
cash proceeds of the securitization payable to the sponsor to cover the repurchase of any financial assets required
for breach of representations and warranties. The balance of such fund, if
any, must be released to the sponsor
one year after the date of issuance.
(B) The documents must include a
representation that the assets were
originated in all material respects in
compliance with statutory, regulatory,
and originator underwriting standards
in effect at the time of origination. The
documents must include a representation that the mortgages included in the
securitization were underwritten at the
fully indexed rate, based upon the borrowers’ ability to repay the mortgage
according to its terms, and rely on documented income and comply with all
existing laws, rules, regulations, and
guidance governing the underwriting of
residential mortgages by federally insured credit unions.

(c) Other requirements. (1) The transaction should be an arms-length, bona
fide securitization transaction. The
documents must require that the obligations issued in a securitization shall
not be predominantly sold to a credit
union service organization in which the
sponsor credit union has an interest
(other than a wholly-owned credit
union service organization consolidated for accounting and capital purposes with the credit union) or insider
of the sponsor;
(2) The securitization agreements are
in writing, approved by the board of directors of the credit union or its loan
committee (as reflected in the minutes
of a meeting of the board of directors
or committee), and have been, continuously, from the time of execution in
the official record of the credit union;
(3) The securitization was entered
into in the ordinary course of business,
not in contemplation of insolvency and
with no intent to hinder, delay, or defraud the credit union or its creditors;
(4) The transfer was made for adequate consideration;
(5) The transfer and/or security interest was properly perfected under the
UCC or applicable state law;
(6) The transfer and duties of the
sponsor as transferor must be evidenced in a separate agreement from
its duties, if any, as servicer, custodian, paying agent, credit support provider, or in any capacity other than
the transferor; and
(7) The documents must require that
the sponsor separately identify in its
financial asset data bases the financial
assets
transferred
into
any
securitization and maintain (i) an electronic or paper copy of the closing documents for each securitization in a
readily accessible form, (ii) a current
list
of
all
of
its
outstanding
securitizations and the respective
issuing entities, and (iii) the most recent Securities and Exchange Commission Form 10-K, if applicable, or other
periodic financial report for each
securitization and issuing entity. The
documents must provide that to the extent serving as servicer, custodian, or
paying agent for the securitization, the
sponsor may not comingle amounts received with respect to the financial assets with its own assets except for the

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National Credit Union Administration

§ 709.9

time, not to exceed two business days,
necessary to clear any payments received. The documents must require
that the sponsor will make these
records readily available for review by
NCUA promptly upon written request.
(d) Safe harbor—(1) Participations.
With respect to transfers of financial
assets made in connection with participations, the NCUA Board as conservator or liquidating agent will not, in
the exercise of its statutory authority
to disaffirm or repudiate contracts, reclaim, recover, or recharacterize as
property of the credit union or the liquidation estate any such transferred financial assets, provided that such
transfer satisfies the conditions for
sale accounting treatment under generally accepted accounting principles,
except for the ‘‘legal isolation’’ condition that is addressed by this section.
The foregoing sentence applies to a
last-in, first-out participation, provided that the transfer of a portion of
the financial asset satisfies the conditions for sale accounting treatment
under generally accepted accounting
principles that would have applied to
such portion if it had met the definition of a ‘‘participating interest,’’ except for the ‘‘legal isolation’’ condition
that is addressed by this section.
(2) For securitizations meeting sale accounting requirements. With respect to
any securitization for which transfers
of financial assets were made after
adoption of this rule, or from a master
trust or revolving trust established
after adoption of this rule, and which
complies with the requirements applicable to that securitization as set forth
in paragraphs (b) and (c) of this section, the NCUA Board as conservator
or liquidating agent will not, in the exercise of its statutory authority to disaffirm or repudiate contracts, reclaim,
recover, or recharacterize as property
of the credit union or the liquidation
estate such transferred financial assets, provided that such transfer satisfies the conditions for sale accounting
treatment under generally accepted accounting principles in effect for reporting periods after November 15, 2009, except for the ‘‘legal isolation’’ condition
that is addressed by this paragraph
(d)(2).

(3) For securitizations not meeting sale
accounting requirements. With respect to
any securitization for which transfers
of financial assets were made after
adoption of this rule, or from a master
trust or revolving trust established
after adoption of this rule, and which
complies with the requirements applicable to that securitization as set forth
in paragraphs (b) and (c) of this section, but where the transfer does not
satisfy the conditions for sale accounting treatment set forth by generally
accepted accounting principles in effect for reporting periods after November 15, 2009, the following conditions
apply:
(i) Monetary default. If, at any time
after appointment, the NCUA Board as
conservator or liquidating agent is in a
monetary
default
under
a
securitization due to its failure to pay
or apply collections from the financial
assets received by it in accordance
with the securitization documents,
whether as servicer or otherwise, and
remains in monetary default for ten
business days after actual delivery of a
written notice to the NCUA Board as
conservator or liquidating agent pursuant to paragraph (f) of this section requesting the exercise of contractual
rights because of such monetary default, the NCUA Board as conservator
or liquidating agent hereby consents
pursuant to 12 U.S.C. 1787(c)(13)(C) to
the exercise of any contractual rights
in accordance with the documents governing such securitization, including
but not limited to taking possession of
the financial assets and exercising selfhelp remedies as a secured creditor
under the transfer agreements, provided no involvement of the conservator or liquidating agent is required
other than such consents, waivers, or
execution of transfer documents as
may be reasonably requested in the ordinary course of business in order to facilitate the exercise of such contractual rights. Such consent does not
waive or otherwise deprive the NCUA
Board as conservator or liquidating
agent or its assignees of any seller’s interest or other obligation or interest
issued by the issuing entity and held
by the conservator or liquidating agent
or its assignees, but shall serve as full
satisfaction of the obligations of the

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§ 709.9

12 CFR Ch. VII (1–1–21 Edition)

insured credit union in conservatorship
or liquidation and the NCUA Board as
conservator or liquidating agent for all
amounts due.
(ii) Repudiation. If the NCUA Board
as conservator or liquidating agent
provides a written notice of repudiation of the securitization agreement
pursuant to which the financial assets
were transferred, and does not pay
damages, defined in this paragraph,
within ten business days following the
effective date of the notice, the NCUA
Board as conservator or liquidating
agent hereby consents pursuant to 12
U.S.C. 1787(c)(13)(C) to the exercise of
any contractual rights in accordance
with the documents governing such
securitization, including but not limited to taking possession of the financial assets and exercising self-help
remedies as a secured creditor under
the transfer agreements, provided no
involvement of the conservator or liquidating agent is required other than
such consents, waivers, or execution of
transfer documents as may be reasonably requested in the ordinary course
of business in order to facilitate the exercise of such contractual rights. For
purposes of this paragraph, the damages due will be in an amount equal to
the par value of the obligations outstanding on the date of appointment of
the conservator or liquidating agent,
less any payments of principal received
by the investors through the date of repudiation, plus unpaid, accrued interest through the date of repudiation in
accordance with the contract documents to the extent actually received
through payments on the financial assets received through the date of repudiation. Upon payment of such repudiation damages, all liens or claims on
the financial assets created pursuant
to the securitization documents shall
be released. Such consent does not
waive or otherwise deprive the NCUA
Board as conservator or liquidating
agent or its assignees of any seller’s interest or other obligation or interest
issued by the issuing entity and held
by the conservator or liquidating agent
or its assignees, but serves as full satisfaction of the obligations of the insured credit union in conservatorship
or liquidation and the NCUA Board as

conservator or liquidating agent for all
amounts due.
(iii) Effect of repudiation. If the NCUA
Board as conservator or liquidating
agent repudiates or disaffirms a
securitization agreement, it will not
assert that any interest payments
made to investors in accordance with
the securitization documents before
any such repudiation or disaffirmance
remain the property of the conservatorship or liquidation.
(e) Consent to certain actions. Prior to
repudiation or, in the case of a monetary default referred to in paragraph
(d)(3)(i) of this section, prior to the effectiveness of the consent referred to
therein, the NCUA Board as conservator or liquidating agent consents
pursuant to 12 U.S.C. 1787(c)(13)(C) to
the making of, or if serving as servicer,
does make, the payments to the investors to the extent actually received
through payments on the financial assets (but in the case of repudiation,
only to the extent supported by payments on the financial assets received
through the date of the giving of notice
of repudiation) in accordance with the
securitization documents, and, subject
to the conservator’s or liquidating
agent’s rights to repudiate such agreements, consents to any servicing activity required in furtherance of the
securitization or, if acting as servicer,
the conservator or liquidating agent
performs such servicing activities in
accordance with the terms of the applicable servicing agreements, with respect to the financial assets included in
securitizations that meet the requirements applicable to that securitization
as set forth in paragraphs (b) and (c) of
this section.
(f) Notice for consent. Any party requesting the NCUA Board’s consent as
conservator or liquidating agent under
12 U.S.C. 1787(c)(13)(C) pursuant to
paragraph (d)(3)(i) of this section must
provide notice to the President, NCUA
Asset Management & Assistance Center, 4807 Spicewood Springs Road, Suite
5100, Austin TX 78759–8490, and a statement of the basis upon which such request is made, and copies of all documentation supporting such request, including without limitation a copy of
the applicable agreements and of any
applicable notices under the contract.

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§ 709.11

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(g) Contemporaneous requirement. The
NCUA Board as conservator or liquidating agent will not seek to avoid an
otherwise legally enforceable agreement that is executed by an insured
credit union in connection with a
securitization or in the form of a participation solely because the agreement does not meet the ‘‘contemporaneous’’ requirement of 12 U.S.C.
1787(b)(9) and 1788(a)(3).
(h) Limitations. The consents set forth
in this section do not act to waive or
relinquish any rights granted to NCUA
in any capacity, including the NCUA
Board as conservator or liquidating
agent, pursuant to any other applicable
law or any agreement or contract except as specifically set forth herein.
Nothing contained in this section alters the claims priority of the
securitized obligations.
(i) No waiver. This section does not
authorize the attachment of any involuntary lien upon the property of the
NCUA Board as conservator or liquidating agent. Nor does this section
waive, limit, or otherwise affect the
rights or powers of NCUA in any capacity, including the NCUA Board as conservator or liquidating agent, to take
any action or to exercise any power not
specifically mentioned, including but
not limited to any rights, powers or
remedies of the NCUA Board as conservator or liquidating agent regarding
transfers or other conveyances taken
in contemplation of the credit union’s
insolvency or with the intent to
hinder, delay or defraud the credit
union or the creditors of such credit
union, or that is a fraudulent transfer
under applicable law.
(j) No assignment. The right to consent under 12 U.S.C. 1787(c)(13)(C) may
not be assigned or transferred to any
purchaser of property from the NCUA
Board as conservator or liquidating
agent, other than to a conservator or
bridge credit union.
(k) Repeal. This section may be repealed by NCUA upon 30 days’ notice
provided in the FEDERAL REGISTER, but
any repeal does not apply to any
issuance made in accordance with this
section before such repeal.
[82 FR 29706, June 30, 2017. Redesignated at 82
FR 50294, Oct. 30, 2017; 85 FR 62213, Oct. 2,
2020]

§ 709.10 Treatment by conservator or
liquidating agent of collateralized
public funds.
An agreement to provide for the lawful collateralization of funds of a federal, state, or local governmental entity or of any depositor or member referred to in section 207(k)(2)(A) of the
Act will not be deemed to be invalid
under sections 207(b)(9) and 208(a)(3) of
the Act solely because such agreement
was not executed contemporaneously
with the acquisition of collateral or
with any changes, increases, or substitutions in the collateral made in accordance with such agreement, provided the following conditions are met:
(a) The agreement was undertaken in
the ordinary course of business, not in
contemplation of insolvency, and with
no intent to hinder, delay or defraud
the credit union or its creditors;
(b) The secured obligation represents
a bona fide and arm’s length transaction;
(c) The secured party or parties are
not insiders or affiliates of the credit
union;
(d) The grant or creation of the security interest was for adequate consideration; and,
(e) The security agreement evidencing the security interest is in writing,
was approved by the credit union’s
board of directors, and has been continuously an official record of the credit union from the time of its execution.
[65 FR 55443, Sept. 14, 2000. Redesignated at
82 FR 50294, Oct. 30, 2017]

§ 709.11 Prepayment fees to Federal
Home Loan Bank.
The Board as conservator or liquidating agent of a federally insured
credit union in receipt of any extension
of credit from a Federal Home Loan
Bank will allow a claim for a prepayment fee by the Bank if:
(a) The claim is made pursuant to a
written contract that provides for a
prepayment fee but the prepayment fee
allowed by the Board will not exceed
the present value of the loss attributable to the difference between the
contract rate of the secured borrowing
and the reinvestment rate then available to the Bank; and
(b) The indebtedness owed to the
Bank is secured by sufficient collateral

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