MBL: A New Look at Commercial Lending, pt 4.
Written by Alicia Nealon, Director of Regulatory Affairs
Welcome back to the fourth and final installment of our Compliance Blog series on the NCUAÃ¢ÂÂs MBL proposal, where we have highlighted the key issues that we are looking for your feedback on.Â Last week, we discussed what would have to be included in a credit unionÃ¢ÂÂs board approved commercial lending policy.
This week, instead of seeking feedback from you about the proposal, I want to clarify the answer to a question that we have received from several of our members: How will this proposal treat nonmember MBL loan participations for the purposes of the statutory cap?
The short answer is that currently, and under the proposal, nonmember MBLs do not count towards the statutory cap. NCUA, however, under its current regulation, requires a credit union to apply for a waiver if its non-member loan participation balance in MBLs is going to exceed the lesser of 1.75 times the credit union's net worth or 12.25 percent of the credit union's total assets.Â Essentially, even though non-member loan participations don't count towards the MBL cap, NCUA's current rule requires a credit union to apply for a waiver if its non-member loan participation balance is going to exceed the cap. The proposal will eliminate the need to apply for that waiver.Â As a result, credit unions will be able to purchase non-member business loans without seeking NCUA approval when their commercial lending portfolio gets to a certain concentration. Credit unions will still need to comply with NCUA's general loan participation rule regarding non-member MBLs.
While this may have been the final installment of NAFCUÃ¢ÂÂs MBL blog series, please continue to reach out to me directly (email@example.com, 703-842-2266) with your thoughts as you and your credit unions review and digest NCUAÃ¢ÂÂs proposal in advance of the August 31, 2015.