By Ray Birch
James Poplin
MONTREAL, Quebec—Credit union executives are still digesting the new MBL rules NCUA has proposed, but early reaction is the new guidelines are a good first step.
CU leaders interviewed at NAFCU’s annual meeting here say they like what they see in the proposal, but hope NCUA in the not-too-distant future delivers even more changes—particularly working with Congress to raise the MBL cap.
That is the position of James Poplin, CEO of the $1.3-billion Austin Telco FCU in Austin, Texas, who said that with MBL business at his CU growing quickly, his shop could bump up against the cap in the next year or two.
“The cap raise is what we need the most,” said Poplin, who added that he needs to spend more time reviewing the proposal. “But what I have seen so far in the rule I do like, such as the waiver of the personal guarantee. Several things have been loosened up by NCUA that will make MBL lending better for us.”
Jim Riederer, CEO of the $238-million CME FCU in Columbus, Ohio, described the rule as a “good start.”
“What we were hoping for is news that NCUA is working with Congress to raise the cap,” said Riederer.
Scott Wilson
As far as the rules easing some of the regulatory burden and eliminating red tape, Riederer said he is not sure. “It’s too early to tell.”
Serving More Members
Scott Wilson, CEO of the $500-million SeaComm FCU in Massena , N.Y., said the changes remove red tape, alleviate some regulatory burden, and will allow his credit union to serve more small businesses.
“It will certainly allow us to make more loans,” said Wilson about the overall rule.
Pointing to the waiver of the personal guarantee, Wilson added that businesses should now feel even more comfortable working with the credit union, since some do not want to tie up their own home and personal finances with the business loan.
“The elimination of the personal guarantee as an important change,” said Wilson. “It is the right thing to allow CUs to make the decisions on the guarantee.”
Overall, Wilson said that anytime NCUA can loosen the rules to allow CUs to prudently manage their own risk is good. “And I think it is very important
Aaron Small
with member business lending.”
Carl Robinson, VP of finance at the $91-million Greater Metro FCU in Long Island City, N.Y., said the MBL adjustments will give the credit union the flexibility it needs to expand its MBL program.
“I really like the increase in net worth limit on loans to one borrower,” said Robinson, who also hopes NCUA will do more with MBL.
No Impact
Aaron Small, EVP COO at the $172-million JetStream FCU in Miami Lakes, Fla., said the rules don’t impact his CU, since it is a CDFI. But commenting on the overall impact on the industry from the proposal, Small said he felt NCUA needed to loosen up the rules, and should do so even further.
“This is a start in the right direction, but it should not be the end,” said Small, acknowledging NCUA stated at its June board meeting that it will continue to look for additional ways to provide MBL relief. “Even with the changes I think the MBL rules are still a bit restrictive, especially if you compare our MBL rules to the rest of the financial services industry.”
Small added that NCUA could be “testing the waters now” in advance of more MBL changes. “I think it is a wise decision to let credit unions step into these new rules slowly, approach areas that maybe they are not completely accustomed to, see how the market reacts and how the CU industry handles these changes, and then expand from there.”