WASHINGTON—CUNA has sent a letter of support for the Credit Union Residential Loan Parity Act (HR 389), stating the legislation would enable credit unions to better serve their members who purchase rental properties.
Reps. Ed Royce (R-CA), Jared Huffman (D-CA), Don Young (R-AK) and Peter DeFazio (D-OR) this week reintroduced the bill, which would remove loans to purchase non-owner-occupied, one- to four-unit dwellings from the calculation of credit union MBLs, which is capped by statute at 12.25% of assets.
“HR 389 addresses a disparity in the treatment of certain residential loans made by banks and credit unions and would provide important regulatory relief for America's credit unions,” wrote CUNA President and CEO Jim Nussle. “When a bank makes a loan to purchase a 1-4 unit non-owner occupied residential dwelling, the loan is classified as a residential real estate loan; however, if a credit union were to make the same, it would be classified as a business loan and therefore would be subject to the cap on member business lending under the Federal Credit Union Act. HR 389 would amend the Federal Credit Union Act to provide an exclusion from the cap for these loans. This exclusion would be consistent with the treatment of these loans proposed under the National Credit Union Administration’s pending risk-based capital regulation. In addition, HR 389 would authorize the National Credit Union Administration to apply strict underwriting and servicing requirements for the loans.
“Enactment of this legislation would not only correct this disparity but it would also enable credit unions to provide additional credit to borrowers seeking to purchase residential units, including low-income rental units,” continued Nussle. “Credit unions would be better able to meet the needs of their members, if this bill was enacted, and it would also contribute to the availability of affordable rental housing.”