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June 30, 2011 – NCUA's board yesterday approved a voluntary corporate stabilization assessment prepayment program with a target of $500 million and allowing prepayments as small as $1,000 and as much as an amount equal to 0.48 percent of insured shares.

NAFCU President Fred Becker said the association has consistently urged NCUA to "consider every option at its disposal" to reduce the impact of stablization assessments on natural person credit unions. He added, "We have also stressed the need for transparency in the process, urging the NCUA to make as much information as possible available on its prepayment proposal so that credit unions can make well-informed decisions regardingthe best course of action for their institution."

Becker also welcomed the agency's openness in discussing the program details during this morning's open board meeting.

The NCUA Board, meeting in open session, on Wednesday morningapproved a program target of $500 million for the voluntary corporate stabilization prepayment program. If total commitments exceed that amount, NCUA will accept prepayments on a pro rata basis to meet the target. Prepayments would be used to reduce the regular 2011 corporate stabilization assessment from a projected 24.9 basis points to 18.5 basis points.

The payment limits and cap, and the program goal, were revised from the draft plan released in May. The board said all the changes were in response to comments received. It originally had a minimum payment of $10,000 and maximum of 0.36 percent of insured shares in its proposal. It also had suggested a minimum program goal of $300 million.

Under the board's action today, the minimum prepayment allowed for any one credit union will be the greater of $1,000 or 0.05 percent of insured shares. Any insured credit union can participate.

As explained in May, no interest will be paid on the prepayments. NCUA says the prepayments will have a "low-risk" rating.

In setting the $500 million target, staff said the agency wanted to ensure that prepayments donot have a material impact on credit unions. It also wanted to avoid a "free rider" situation in which a large number of credit union reap the benefits of prepayments by a relative few large institutions. However, the agency could propose future programs of this kind throughout the life of the stabilization fund, which closes in 2021.

All today's decision means, for now, is thatNCUA is ready to receive applications. Here's the timeline the agency will follow:

• By today, a Letter to Credit Unions is due for release detailing the program and providing agreement forms and instructions.
• By July 29, all agreement forms must be received by the agency.
• On Aug. 9, NCUA will e-mail those credit unions that applied and let them know the results of aggregate commitments. This is when credit unions will find out if the agency has enough commitments to go forward.
• On Aug. 18, provided the minimum volume is met, the agency will process a direct debit of the credit union's account through Pay.gov.

There is widespread interest in participating. NCUA staff said a total of 184 comments were received. Of those, 169 were from credit unions, and 133 of those said they would participate. Prepayments will need to be reported in a new line on the call report that will appear for the Sept. 30 cycle. NCUA estimates its quarterly call report data will be out in mid-November.

NCUA is hoping to have a new section of information posted to its website today providing full details. The agency also plans to hold a free webinar at 2 p.m. July 11 to present program details.