The National Credit Union Administration (NCUA) yesterday proposed substantial changes to its member business loan (MBL)regulations removing non-statutory requirements.
The agency proposed to exempt from the MBL cap of 12.25 percent of assets participations in loans to non-members.
The proposal eliminates the current rule’s prescriptive underwriting criteria and waiver requirements in favor of a principles-based approach to regulating commercial loans. Explicitly, the proposal eliminates loan-to-value requirements, aggregate limits on construction and development loans and the requirement of a personal guarantee. The proposed rule gets rid of the minimum experience requirement of two-years in making and administering business loans.
Also, the proposed rule exempts from the requirements of proposed §723.3 (board of directors and management responsibilities) and §723.4 (commercial loan policy) credit unions with both assets less than $250 million and total commercial loans less than 15 percent of net worth that are not regularly originating and selling or participating out commercial loans (qualifying credit unions). In other words, these qualifying credit unions would be alleviated from the burden of having to develop a full commercial loan policy and commercial lending organizational infrastructure. According to NCUA, nearly 700 credit unions that currently engage in a small level of commercial lending would be exempt from the requirement to establish a policy.
Furthermore, there are two types of loans that are not commercial loans subject to the proposed safety and soundness provisions but they are MBLs and thus, must be counted against the credit union’s net member business loan balance. Specifically, loans secured by a 1- to 4- family residential property that is not the borrower’s primary residence, and loans secured by a vehicle manufactured for household use that will be used for a commercial purpose are generally not commercial loans, but they are MBLs.
Read the proposal.
Once again, thumbing their nose at Congress while providing for an incalculable increase in system risk, on a product that examiners and most CUs have no experience in.
ReplyDeleteNCUA to congress-once again- "drop dead".