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CUNA Regulatory Comment Call

December 2, 2004

EXECUTIVE SUMMARY

• The NCUA Board unanimously approved a proposed rule that will amend the lending rules to incorporate legal interpretations previously issued by NCUA’s Office of General Counsel (OGC) regarding the effect of partial government guarantees and the permissible maturities for certain types of loans.
• The proposal addresses the following:
  • That loans with a partial government guarantee, insurance, or advance commitment to purchase a portion of the loan are also included within the provisions of the rule that provide relief from the limits on maturities, interest rates, and penalties.
  • The conditions for applying the lending rules to loans secured by mobile homes, recreational vehicles, house trailers, and boats that would qualify for the longer 20-year maturity.
  • That loans secured by manufactured homes may be considered real estate loans and, therefore, qualify for the longer 40-year maturity limit.
• Comments will be due by January 25, 2005. Please submit your comments to CUNA by January 19, 2005.

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Vice President and Associate General Counsel Mary Dunn at mdunn@cuna.coop and to Assistant General Counsel Jeff Bloch at jbloch@cuna.coop; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the proposed rule, or you may access it here.

BACKGROUND

The NCUA Board has a policy of continually reviewing NCUA rules to “update, clarify and simplify existing regulations and eliminating unnecessary and redundant provisions.” As a result of NCUA’s 2003 review, the Board determined that the rules on loan guarantees and loan maturities should be updated to reflect OGC opinions.

DESCRIPTION OF THE PROPOSED RULE

The NCUA Board proposes to revise the lending rules to incorporate a number of OGC interpretations regarding loans guaranteed under state or federal loan guarantee programs, mobile homes, and manufactured homes. Here are the proposed changes:

• The Federal Credit Union Act (FCUA) and the lending rules limit a federal credit unions’ authority regarding loan maturities, rates of interest, security and prepayment penalties. For loans secured by a state or federal government insurance or guarantee or in the case of a state or federal program providing an advance commitment to purchase the loan, the FCUA provides relief from these limitations and permits a federal credit union to make the loan under the terms of the government program. The proposed rule will clarify that a partial government guarantee, insurance, or commitment to purchase a loan will be sufficient to qualify for this relief.
• Loan maturities are generally limited to no more than 12 years, except the lending rules allow loan maturities of 20 years for mobile home loans and up to 40 years (or more with Board approval) for residential mortgage loans. The proposed rule will adopt a prior OGC interpretation that a house trailer, recreational vehicle, or a boat will be considered a mobile home if the home is owner-occupied, secured by a first lien, and qualifies for the home mortgage interest deduction under Internal Revenue Service (IRS) rules. The IRS rules generally require the home to have sleeping, cooking, and toilet facilities. A manufactured home will qualify for the longer maturities permitted for residential mortgage loans if the home is permanently affixed to the land and meets the other requirements currently outlined in the lending rules.

• Do you agree with the proposed change that includes a partial government guarantee, insurance, or advance commitment to purchase a portion of the loan within the provisions permitting a federal credit union to make the loan under the terms of the government program, regardless of the limits in the lending rules for maturities, interest rates, and penalties?
  
  

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• Do you agree with the proposed change that will incorporate a prior OGC interpretation allowing a house trailer, recreational vehicle, or a boat to be considered a mobile home, and qualify for the longer 20-year maturity limit, if the home is owner-occupied, secured by a first lien, and qualifies for the home mortgage interest deduction under IRS rules?
  
  

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• Do you agree with the proposed change in which a manufactured home will qualify for the longer maturities permitted for residential mortgage loans if the home is permanently affixed to the land and meets the other requirements currently outlined in the lending rules?
  
  

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• Other comments?
  
  

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