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New Rules On CU Loan Participations Take Effect July 25
WASHINGTON (6/27/13)--July 25 is the effective date of the National Credit Union Administration's final rule on loan participations, which implemented a number of improvements, sought by the Credit Union National Association, from the original proposal.

CUNA President/CEO Bill Cheney welcomed the agency's changes to its original plan and said it gave credit unions a "much more workable framework" to utilize loan participations.

"The original proposal had strict limitations and we are pleased to see that NCUA has taken into consideration the majority of CUNA's recommendations and worked with the system to make significant improvements in the final rule," Cheney said of the rule.

The NCUA last week approved the final rule and set a limit on loans from one originator of 100% of a credit union's net worth. This is up from the proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower. CUNA urged such changes and the CUNA board emphasized credit union concerns as it worked to make the rule more practicable.

CUNA also sought the formation of a working group, which the agency established.

"We think the process and outcome were improved as a result. We will be urging similar approaches in the future," said CUNA Deputy General Counsel Mary Dunn.

The NCUA also approved a provision so that credit unions pushed over the limit by new rule can move their loans into line: such credit unions would not have to sell loans immediately to come into compliance but can bring their participation activity into line in the ordinary course of business or seek a waiver.

The rule was published in the June 25 Federal Register, and that document sets the July 25 effective date.

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