Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer
9/13/2018

Due October 9, 2018 - NCUA Lending Reg Amendments

The National Credit Union Administration’s (NCUA) board issued a proposed rule to amend parts of its regulation relating to Loans to Members and Lines of Credits found under Part 701. The proposed rule can be found here, which also includes directions for submitting comments.

This proposal includes changes that were part of the NCUA’s regulatory reform agenda previously discussed. The proposed rule will impact Part 701 – Loans to Members and Lines of Credit to Members, making them more “user friendly by: (1) identifying in one section the various maturity limits applicable to FCU loans; (2) clarifying that the maturity for a lending action that qualifies as a “new loan” under GAAP is calculated from the new date of origination; (3) seeking comment on whether the NCUA should provide for longer, more flexible maturity limits on certain loans; and (4) more clearly expressing the limits in place for loans to a single borrower or group of associated borrowers.”

With regard to loan maturity, the regulation addresses this topic in four separate sections. To remedy this, the board proposes to make the NCUA’s loan maturity requirements more understandable and user-friendly by identifying in one section (§ 701.21(c)(4)), including cross-citations, all of the maturity limits applicable to FCU loans.

The NCUA is seeking comment on whether there should be longer maturity limits for 1-4 family real estate loans and other loans, such as certain home improvement, mobile home, and second mortgage loans. The NCUA poses the following questions:

(1) whether the NCUA should provide longer maturity limits for certain lending actions permitted by §§ 107(5)(A)(i)-(ii) of the FCU Act;

(2) the appropriate maturity limits for such lending actions;

(3) whether the case-by-case board exemption should be retained and, if so, under what circumstances would such exemptions be appropriate; and

(4) any other issues stakeholders believe relevant.

The NCUA is also proposing making regulations for borrower limits more user friendly as well. Currently, three provisions of NCUA’s regulations address limits on loans to a single or group of associated borrowers. (1) § 701.21(c)(5) addresses the general limit; (2) § 701.22(b)(5)(iv) addresses the limit on loan participations; and (3) § 723.4(c) addresses the limit on commercial loans. The NCUA believes that inserting cross-citations is a more efficient and user friendly way to identify that there are multiple lending limits throughout the NCUA’s regulations.

The NCUA is also considering a universal standard limit for loans to a single borrower or group of associated borrowers with the goal to help facilitated compliance and reduce regulatory burden. The NCUA asks:

 

(1) whether the NCUA should provide a single universal standard limit for commercial loans and loan participations that may be purchased with respect to a single borrower or group of associated borrowers;

(2) if so, the appropriate limit for such a standard;

(3) if not, why not; and

(4) any other issues stakeholders believe are relevant to this determination.

 

The Board also requests that commenters consider FCU Act limitations, specifically the general limit on loans to a single borrower of “10 per centum of the credit union’s unimpaired capital and surplus” in § 107(5)(A)(x), when commenting.

 

InfoSight Highlight:  Update to Advertising Checklists

 

The following checklists related to Advertising have been updated to be more comprehensive and provide clearer guidance, and can be found within their related topics:

  • Advertising Closed-End Consumer Real Estate Loans Checklist
  • Advertising Closed-End Consumer Loans Checklist
  • Advertising Home Equity Line of Credit Checklist
  • Advertising Open-End Consumer Loans Checklist
  • Advertising Credit Card Loans Checklist

These updates may be found here. Review today to ensure compliance with your credit union advertising!

 

As always, CUAD members may contact Amy Kleinschmit with any compliance related questions.

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