Removing Barriers Blog

NCUA Board Meets Amidst COVID-19 Pandemic
Posted April 16, 2020 by dyi

The NCUA Board Meeting was called to order today at 10:00 a.m. EST. This was the first public meeting NCUA has had since adopting a telework posture nearly one month ago. The meeting was open to the public via a live webcast only. 

In the Board meeting, Board Member Harper acknowledged the following changes he hopes Congress will make soon, including:

  • Making the Central Liquidity Facility fund provisions in the CARES Act permanent or extending the sunset by at least one year to December 31st, 2021;
  • Allowing all member business loans made on or before the start of the COVID-19 public health emergency through December 31st, 2020, to be made exempt from the member business lending cap;
  • Providing NCUA with an additional $10 million in appropriations for emergency grants;
  • Allowing all federal charter types to add underserved areas to their fields of membership; and
  • Allowing NCUA to supervise credit union third-party vendors.

NCUA Board Member McWatters stressed the critical importance of liquidity and capital for credit unions and other financial institutions. He stated that both the regulators and the regulated must at all times remain mindful that in a financial crisis or economic downturn, the fate of a financial institution depends upon its liquidity and capital levels. His suggestions for legislative action included:

  • The creation of a permanent separate and robust, standby liquidity facility for the NCUA to employ as needed, or the permanent restructuring of the Central Liquidity Facility to create the same;
  • Capital reform to assist credit unions who may experience issues from business and other closures, economic slowdowns, mortgage and loan forbearances, job losses, lacks to credit union depository quality and other COVID-19 pandemic related consequences;
  • Raising or eliminating the member business lending cap;
  • Permitting all credit unions to participate as borrowers in the Paycheck Protection Program under the CARES Act and SBA regulations;  
  • Permitting single common bond community charter credit unions, not just multiple common bond institutions, to add underserved and unserved areas to their membership;
  • Expanding the community development revolving loan fund by an additional $10 million or more in appropriations to support low income credit unions and small credit unions; and
  • Providing the NCUA with examination and enforcement authority over third-party vendors, including IT and then tech related vendors. 

Interim Rule Enhances the Central Liquidity Facility as a Liquidity Backstop

After opening remarks, the NCUA Board stated its approval of an interim final rule to Part 725 to implement newly established flexibilities arising from the changes to the Central Liquidity Fund (CLF) statute and regulations. 

Section 4016 of the CARES Act makes for amendments to the CLF provisions of the Federal Credit Union Act (FCUA). Per the CARES Act, the NCUA made the following changes to CLF regulation Part 725, in the form of in interim final rule (IFR), which will sunset on December 31st, 2020. The IFR:

  • Eliminates the six-month waiting period for a new member to receive a loan;
  • Makes temporary amendments to the waiting period for a credit union to terminate its membership;
  • Eases collateral requirements on some assets; and
  • Allows, temporarily, for an agent member to borrow for its own liquidity needs.

The IFR becomes effective upon publication in the Federal Register and will expire on December 31, 2020. There is also a 60-day comment period.

Temporary Final Rule Provides Regulatory Relief

The NCUA Board also unanimously approved an IFR that temporarily raises the maximum aggregate amount of loan participations that a federally insured credit union may purchase from a single originating lender without needing a waiver from an NCUA regional director. Under this final rule, the aggregate loan participation amount from a single originating lender will now be the greater of $5 million or 200 percent of a federally insured credit union’s net worth.

The interim final rule also temporarily suspends limits on the types of eligible obligations that a federal credit union may purchase and hold. Under the rule, a federal credit union no longer has to refinance a purchased obligation so that it matches the types of loans the credit union is allowed to make.

The NCUA Board also is suspending the required timeframes for the occupancy or disposal of properties held by federal credit unions that are not being used to conduct business or that have been abandoned. These temporary modifications are effective upon publication in the Federal Register and will be in place until December 31, 2020.

Board Approves Deferment of Appraisal Requirements for 120 Days

The NCUA Board also unanimously approved an interim final rule that allows a credit union to temporarily defer certain appraisals and evaluations for up to 120 days when other alternatives are not available and when the appraisal or evaluation would delay the closing of the residential or commercial real estate loan transaction. The interim final rule covers all real estate related transactions except those involving acquisition, development, and construction. A similar rule was previously approved by the federal banking agencies. This temporary rule will expire on December 31, 2020, is effective upon publication in the Federal Register, and has a 45-day comment period.

Board Raises the Real Estate Appraisal Threshold to $400,000

Lastly, the NCUA Board approved, by a 2–1 vote (with Board Member Harper dissenting), a final rule increasing the threshold level where an appraisal is not required for residential real-estate related transactions from $250,000 to $400,000. If the property involved in the transaction is below the threshold, federally insured credit unions will be required to obtain written estimates of the market value of the real estate, consistent with safe and sound practices.This final rule aligns the NCUA’s appraisal rule with the requirements of the federal banking regulators