WASHINGTON (7/8/13)--Even before the National Credit Union Administration last week delayed the effective date for its final rule on loan participations until Sept. 23, the Credit Union National Association's compliance team was helping credit unions prepare for compliance by offering five key things credit unions should know about the rule in a CompBlog post.
The NCUA approved the loan participation rule at last month's open board meeting. The rule sets a limit on loans from one originator of 100% of a credit union's net worth, and provides an expanded waiver process for the single-originator limit and limits to one borrower.
The agency 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 original effective date was July 25. CUNA suggested many of the changes that made their way into the final rule and also urged the agency to delay the effective date.
In the CUNA CompBlog post, CUNA Senior Vice President for Compliance Kathy Thompson noted that the NCUA has expanded its requirements of what needs to be in loan participation policies. Under the new rule, the NCUA requires each federally insured credit union to establish limits on the amount of loan participations that may be purchased by each loan type. The agency also expects policies to cite the concentration limits in the regulation, or to set tighter limits, if the credit union so decides.
The new regulation specifies nine things that the loan participation agreement must address. Any loan participation consummated on or after the effective date will have to be based on an agreement that complies with the new regulation, Thompson wrote. "Probably much of what NCUA now requires is already in contracts," but those contracts should still be reviewed to ensure compliance ahead of time, she said.
Other key facts highlighted in CUNA's CompBlog post address
Risk retention requirements;
Concentration limits; and
CUNA also pointed out to NCUA the practical implementation issues that Thompson raised in this blog post.
For the full CompBlog post, use the resource link.