Thursday, September 21, 2017

Fox Communities CU Receives Waivers for Financing Exposition Center

The Wisconsin Office of Credit Unions on August 17, 2017 granted a waiver to Fox Communities Credit Union (Appleton, WI) with regard to construction and development loans and security and collateral requirements.

The National Credit Union Administration had no objections to the waiver approval as long as three contingencies were met.

According to information obtained in an Open Records Request, Fox Community was approved to provide $10.175 million in funding for a publicly owned exposition center, which would result in a loan-to-value ratio of 100 percent. However, the credit union management believes that its share of the funding is more likely to be $8 million. At $10 million, the loan will represent 6.67 percent of the credit union's net worth.

The total funding for the project is $31.5 million with the remainder of the financing coming from local/regional banks.

WI DFI-CU 72.04 2(a) requires a 25 percent equity interest in construction projects or 20 percent equity interest in a project being financed if the loan is for construction.

In addition, WI DFI-CU 72.07 (2) requires "[f]or a member business loan secured by collateral on which the credit union will have a first lien, a credit union may grant the loan with an LTV ratio in excess of 80% only where the value in excess of 80 percent is as follows:
(a) Covered through acquisition of private mortgage or equivalent type insurance provided by an insurer acceptable to the credit union, and the LTV ratio does not exceed 95 percent; or
(b) Insured or guaranteed, or subject to advance commitment to purchase, by an agency of the federal government, state, or any of its political subdivisions, and the LTV ratio does not exceed 95 percent.

The loan will be collateralized by a secured interest in a hotel room tax. Thirty percent of the 10 percent hotel room tax will be allocated to repay the loan. In addition, the borrower will establish a $1.5 million reserve account that can be used if hotel room tax revenues are insufficient.

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