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CU reps launch mutual fund to help with MBL cap
MADISON, Wis. (3/24/11)--A small group of credit union professionals are creating a mutual fund that could help credit unions package and sell their business loans--giving these credit unions a way to better manage the member business lending cap. The new mutual fund is tentatively named the “Unity Fund.” The fund is the collaboration of Tom Campbell and Mario Pelosi, managing directors of Glasgow Partners; David Dunn former commercial lender and former president of two credit union service organizations (CUSOs) providing business services, and Guy Messick from the law firm of Messick & Weber PC. The team will partner with investor credit unions in a CUSO that is a registered investment advisor to launch the mutual fund. The group’s proposal was conditionally approved by BNY Mellon in December to become a mutual fund offered by BNY Mellon in its family of mutual funds. This was no small feat, according to Dunn. It shows the business viability of this project, he added. It has a few more hurdles to clear before it can open for business, but its prospects look bright--no fund that has gained BNY Mellon approval has ever failed to clear subsequent regulatory hurdles. At this time, the National Credit Union Administration (NCUA) has interpreted the investment regulations as not permitting federal credit unions to buy shares in the proposed mutual fund. There will be follow through with NCUA to determine if the investment regulations could be amended to permit credit unions to buy shares in the mutual fund. In the meantime, the shares will be sold to institutional investors. The quality control on the loans will be extensive, according to the fund’s creators. Only experienced and successful business lending credit unions and CUSOs will be certified to sell loans into the mutual fund. The CUSO will certify the lenders, and that certification must be reviewed and renewed annually. If a non-certified credit union wants to sell loans to the mutual fund, a certified credit union must review and approve the underwriting. The certified lenders will service the loans in the mutual fund. The CUSO will review all loans being sold into the mutual fund and there will be a third-party reviewer who will sample test the underwriting. “The mutual fund will only be successful if the loans are of the highest quality and we are sparing no effort to insure this,” Dunn said. “We are excited about this new tool for the credit union industry that will help manage the regulatory cap issue [because when credit unions sell their business loans, those assets are taken off their books], provide liquidity from outside the industry, shift some lending risk to outside the industry, and provide high underwriting standards that will tend to raise the bar for those credit unions that want to sell to the mutual fund. We look forward to the day when credit unions can buy shares in the mutual fund so they can benefit from a favorable return on their investment without the same level of risk a loan participation might pose. “There is a great deal of business lending opportunity for credit unions,” he added. “We’re not looking for the big syndicated real estate loans that have been so problematic. Credit unions can help America recover if they have the necessary business-lending expertise and regulatory relief. This mutual fund can help credit unions seize their significant business-lending opportunities.” CUNA and credit unions are trying to get Congress to increase credit unions’ MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said. For more information, contact David Dunn at or Guy Messick at


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