ALEXANDRIA, Va.—The NCUA's proposed regulatory reforms to loans and lines of credit to credit union members received support from CUNA and NAFCU this week.
NAFCU stated in a comment letter to the agency that the reforms will positively impact the industry.
In its letter the group recommends the expansion of loan maturity limits "in order to provide members with greater access to credit, and preserve the credit union-member relationship."
The agency's proposal, issued during the August board meeting, would, among other things, make explicit the maturity date for a "new loan" and is seeking comments on possibly provide longer maturity limits for one-to-four family real estate, home improvement, mobile home and second mortgage loans. It would also streamline regulations regarding loans by identifying in one section all of the various maturity limits applicable to federal credit union loans, and clearly express the limits for loans to a single borrower or group of associated borrowers.
Where Extensions Needed
NAFCU Regulatory Affairs Counsel Kaley Schafer wrote that maturity limits should be extended for mobile homes, second mortgages and improvements to residences, among others.
Schafer said NAFCU members feel strongly about expanding the general 15-year maturity limit rule. She also detailed that the NCUA should evaluate whether the definition of "principal residence" needs to be reinterpreted and expand the advanced commitment exception to include government-sponsored enterprise commitments.
The association said it also supports the technical amendments to the NCUA's regulations providing all maturity limits in one section, and a clearer definition of when a loan constitutes a "new" loan under generally accepted accounting principles (GAAP). "In the context of a refinance, what constitutes a 'new' loan under the current rule was unclear and the technical amendments will alleviate regulatory burden and ease compliance," Schafer wrote.
CUNA’s Comment
Similarly, CUNA said it also supports NCUA’s proposal.
“CUNA supports NCUA’s efforts to streamline and organize regulations applicable to credit unions to improve clarity and make compliance easier,” CUNA’s letter stated. “When supervisory inconsistencies occur among the supervisory office regions, a disparate regulatory landscape exists, rendering challenges and disparities for credit unions. CUNA appreciates the agency’s willingness to engage the credit union industry in dialogue to address rule transparency.”
CUNA also called on NCUA to extend the maturity limit of one-to-four family, non-owner occupied real estate loans past the current 15 years. While such loans were taken out of the member business lending cap due to the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155), the existing maturity limit is still applicable for those loans, CUNA said.
‘Good Public Policy’
“Because credit unions are uniquely subject to both lending and maturity limit caps (whereas banks are not), we support and propose an extension of the maturity limit available for such loans, as this change is necessary and good public policy,” the letter stated. “CUNA would support any agency efforts to remediate this imbalance. Further, the 15-year maturity limit restricts how credit unions can best serve their members relative to FNMA and FHLMC investor requirements, forcing credit unions to send members to a mortgage broker or bank, which can offer a term beyond 15 years, and requiring members to pay higher fees and rates or could cost the credit union a member relationship.”
The letter also asks NCUA codify that loans and participations backed by the U.S. government (such as those made by the Small Business Administration’s 7(a) program) remain exempt from the member business loan cap. Currently such loans are exempted from the cap by discretionary determination of NCUA’s regional directors.