Fri, Jun 21, 2013
Washington, District Of Columbia
The NCUA Board of Directors met on June 20 for their monthly board meeting at the Agency’s headquarters in Alexandria, Virginia. The Board approved two rules: a final rule with regards to loan participations for federally-insured credit unions (FICUs) and a rule regarding MBLs for Illinois-chartered credit unions.
The loan participations final rule made several changes to the rule that had been proposed during the December 2011 board meeting. Both MDDCCUA and CUNA had advocated against the proposed rule, and had asked the Agency for significant changes to the proposed rule, should the Agency decide to move forward with the rule.
While the Agency did choose to move forward with the final rule, there were positive changes made in the final rule. The final rule increased the limit of loan participations from a single originator to the greater of $5 million or 100% of the FICU’s net worth. This is a significant improvement over the 25% limit that had been proposed back in December 2011. The NCUA also provided waiver authority from this limit and will allow credit unions to participate in loans with different underwriting standards from the purchasing credit union.
The final rule retained the 15% of net worth limit on loans to one borrower (LTOB) that the Agency had proposed in December 2011. The LTOB limit could also be exceeded under a waiver. Credit unions with loan participation investments now that are greater than these limits would be grandfathered until the FICU's participations in excess of these limits have been paid off or sold in the normal course of business.
Furthermore, the final rule was improved to permit a FICU to purchase a participation in a loan it is empowered to grant, even if it does not originate that type of loan or if the loan is underwritten using standards other than those the credit union uses when originating loans.