Board Action Memorandum - Final Rule – Simplification of Share Insurance Rules (Part 745)

TO: NCUA Board

FROM: Office of General Counsel

DATE: September 18, 2024

SUBJ: Final Rule – Simplification of Share Insurance Rules (Part 745)

ACTION REQUESTED: NCUA Board approval to issue the attached final rule.

DATE ACTION REQUESTED: September 19, 2024.

OTHER OFFICES CONSULTED: Office of the Chief Economist, Office of Credit Union Resources and Expansion, Office of Examination and Insurance, Office of Consumer Financial Protection, Office of National Examinations and Supervision, Asset Management Assistance Center.

VIEWS OF OTHER OFFICES CONSULTED: The listed offices reviewed the draft rule and provided input, which was considered and adopted as appropriate.

BUDGET IMPACT, IF ANY: None.

SUBMITTED TO INSPECTOR GENERAL FOR REVIEW: Yes.

RESPONSIBLE STAFF MEMBERS: Thomas Zells, Senior Staff Attorney, Office of General Counsel.

SUMMARY: The final rule would amend the NCUA's regulations governing share insurance coverage. The final rule simplifies the share insurance regulations by establishing a “trust accounts” category that provides for coverage of funds of both revocable trusts and irrevocable trusts deposited at federally insured credit unions (FICUs) in the accounts of members or those otherwise eligible to maintain insured accounts (member accounts). The final rule also provides consistent share insurance treatment for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender and updates recordkeeping requirements to explicitly allow the NCUA to look to records held in the normal course of business that are maintained by parties other than a FICU and its members on the members' behalf. The changes to the trust account and mortgage servicing account provisions would align with changes the FDIC previously adopted that took effect on April 1, 2024.

The final rule would have an effective date of December 1, 2026, for the NCUA's changes to the trust account regulations. This delayed effective date is intended to provide FICUs, accountholders, and the NCUA time to prepare for the changes in trust account share insurance coverage. The changes to the mortgage servicing account provisions and the recordkeeping provisions, which would not require the same kind of adjustments, would not be delayed to this extent and would become effective 30 days after the final rule is published in the Federal Register.

RECOMMENDED ACTION: The NCUA Board approve the attached final rule for publication in the Federal Register with the varied effective dates noted above.

ATTACHMENT: Final rule.