July 25, 2012 – The NCUA Board on Tuesday extended the 18 percent loan interest rate ceiling, shaved $2 million off its 2012 budget and issued proposed rules addressing what is a “troubled” credit union and requirements for credit union access to emergency liquidity.
Prior to yesterday’s meeting, the FCU loan rate ceiling was scheduled to revert to 15 percent on Sept. 10. NAFCU has consistently urged that the 18 percent ceiling be continued given a recent upward trend in interest rates and the adverse impact that lowering the cap would have on credit availability. The board voted unanimously in extending the 18 percent ceiling to March 10, 2014. NCUA will issue a Letter to Federal Credit Unions.
The board also approved a $2 million reduction in NCUA’s 2012 operating budget; the $2 million in savings will be applied to the 2013 budget. The net reduction includes a net decrease of $3.67 million in employee pay and benefits and net increases in travel costs ($449,450); rent, communications and utilities ($202,000); administrative costs ($25,000); and contracted services $997,990). The agency pushed some of its staff costs to contracted services and added two director positions to the Office of Consumer Protection.
NCUA Chairman Debbie Matz noted that this marks the third straight year the agency has decreased its budget mid-year.
NAFCU has urged the agency to manage expenses as closely as possible to mitigate the impact on credit unions, but it remains concerned that the agency has issued three consecutive budgets without any prior hearing.
In other action Tuesday, the board addressed the following in proposed rules:
- What is “troubled condition”: The proposed rule allows ether NCUA or a state supervisory authority to declare a federally insured, state-chartered credit union to be in a “troubled condition.” This aimed at enhancing NCUA’s ability to identify a troubled credit union and better protect the National Credit Union Share Insurance Fund from losses.
- Access to emergency liquidity: This proposed rule would require federally insured credit unions to have in place certain contingency plans if emergency liquidity is needed. FICUs with less than $10 million in assets would be required to maintain a basic written policy that provides a board-approved framework for managing liquidity and a list of contingent liquidity sources it can utilize. Those with assets of $10 million or more would be required to have a contingency funding plan that clearly sets out strategies for addressing liquidity short falls; and FICUs with assets of $100 million or more would be required to have access to a backup federal liquidity source.
NAFCU has told NCUA that it opposes requiring credit unions to have a backup source of liquidity. However, if the NCUA proceeds with that approach, it continues to urge the agency to include membership to a Federal Home Loan Bank as an option to meet such a requirement.
NAFCU will issue Regulatory Alerts for members on each proposed rule.
The board also received a briefing on an interagency rulemaking being drafted on appraisals for certain high-risk mortgages. Called for under Dodd-Frank Act revisions to the Truth in Lending Act, the proposed rule, staff said, will likely include a requirement for creditors to provide a free copy of the appraisal to borrowers three days before closing. They expect to seek input on whether they should allow any exceptions. The rulemaking is expected to be issued for comment in August or September.