Bill Excludes Non-Owner Occupied Home Loans from Member Business Loan Cap

The Senate passed on March 14 S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act. A section of the bill would exempt one-to-four family non-owner occupied home loans at credit unions from the aggregate member business loan (MBL) cap of 12.25 percent of assets.

According to the Congressional Budget Office (CBO), there is an estimated $18 billion of such loans on the balance sheets of credit unions.

CBO believes that credit unions holding approximately 20 percent of these non-owner occupied home loans would benefit from this section of the bill, "because they are approaching the cap on the amount of member business loans."

If S. 2155 becomes law, CBO estimates that these credit unions "would issue about 10 percent more loans for non-owner occupied homes each year."

The growth in non-owner occupied home loans at these credit unions would come at the expense of taxable financial institutions -- primarily commercial banks and thrifts.

CBO expects this provision to increase the federal deficit by $10 million over the 2018 - 2027 time period.

However, the CBO analysis does not look at the impact of this section on the ability of credit unions to originate more business loans, as these credit unions will have more breathing room relative to the MBL cap. Presumably the expansion in business lending would come at the expense of taxpaying financial institutions. This would suggest that CBO's estimate of this section of the bill understates the federal deficit.

Read CBO's analysis (go to page 9).