The National Credit Union Administration has approved an investment pilot program which will permit up to 30 complex federal credit unions (over $500 million in assets) to invest in ways previously prohibited under part 703 of NCUA’s regulations. The NCUA worked with ALM First Financial Advisors, LLC. to develop the program. ALM First is a Securities and Exchange Commission (SEC) registered investment advisor.

The program will allow complex FCUs to invest in a series of non-registered investment funds comprised of consumer loans. The program includes the following stipulations: “The pilot fund would be comprised of permissible consumer loans for federally insured credit unions with maturities of less than 10 years and overnight investments;” and “Federal credit unions must be complex and have a capital adequacy classification of well capitalized to invest in the fund and are limited to an aggregate investment of 50 percent of net worth as defined in part 702 of NCUA’s regulations.”

Requirements and conditions for the program have been published on NCUA’s website.

This is the first time credit unions have been allowed to sell securities back by consumer loans. Credit unions have been doing so for securities backed by auto loans since 2019. ALM First worked with two credit unions (Oregon Community Credit Union and Space Coast Credit Union) in the sale of securities totaling nearly $700 million. In the five years since NCUA allowed credit unions to begin selling those securities backed by auto loans, credit unions have issued just under $6 billion.