WASHINGTON (1/3/12)--The National Credit Union Administration's (NCUA) proposed revisions to loan participation investment rules, which were released at the December monthly open board meeting, are now out for public comment, and the Credit Union National Association (CUNA) is encouraging credit unions to weigh in on the proposal.
The NCUA proposal would impact all federally insured state credit unions (FISCUs) that purchase participations in loans originated by other credit unions. Specifically, under the proposal, loan originators would need to retain 10% of the original loan, and loan participations involving a single originator would be limited to 25% of the FISCU's net worth. The NCUA proposal also sets a 15% of net worth limit on loans to one borrower.
While a waiver is permitted from the limit on participations involving the same borrower, the state chartered credit unions would have to apply to the NCUA Regional Director for approval.
Just over 1,400 federally insured credit unions held over $12.4 billion in outstanding loan participations this year, and loan participation balances have grown by 28% since 2007, the NCUA noted. NCUA Chairman Debbie Matz said "large volumes of participated loans tied to a single originator, borrower, or industry--or serviced by a single entity--have the potential to impact multiple credit unions if problems occur."
CUNA in the comment call said that some are concerned that the NCUA is expanding its regulatory reach to encompass state-chartered credit unions, and said the NCUA loan participation proposal could have a negative impact on dual-chartered credit unions. "If the proposal is adopted, state regulators will have no leeway to develop their own regulatory approach to loan participations, even though NCUA has not provided sufficient justification for the expansion," CUNA said.
In the comment call, CUNA asks if there is a need for these new loan participation rules, and whether or not the NCUA has provided sufficient justification for this proposal. CUNA also asks credit unions if the proposal should be applied to state chartered credit unions. Credit unions can also comment on the proposed loan participation limits, and the NCUA's waiver process, among other items.
Interested parties, including credit union officials and leagues, may file a comment letter with the NCUA for up to sixty days from when it is published in the Federal Register. The proposal has not yet been published; the CUNA Comment Call (see resource link below) will include the comment deadline as soon as it is available.
Comments may be filed with NCUA at firstname.lastname@example.org.
For the full CUNA comment call, use the resource link.