NCUA Legal Opinions: Still Good?; New in March
Written by Pamela Yu, Special Counsel for Compliance and Research, NAFCU
NAFCU's Compliance Team is often asked if a particular NCUA legal opinion is still valid guidance or how to determine if an opinion has been superseded. NCUA's website, on its Rules and Regulations page, describes the parameters and limitations of the staff opinions and interpretive letters:
As a public service, and in an effort to help credit unions, lawyers, and others having an interest in the law applicable to federally insured credit unions better understand the statutes and regulations administered by the National Credit Union Administration, the NCUA publishes certain of staff's legal opinions and interpretive letters issued since 1991. The NCUA has not attempted to identify or publish all, or even most, letters on a particular subject prior to that year, and there may be other letters that have not been selected for publication. Similarly, the NCUA generally does not review opinions or letters once they have been published for the purpose of flagging or removing those that may have become outdated, superseded or discredited, or that may have been revised, modified, revoked or suspended. Further, the letters' conclusions may be limited to specific facts stated in the letters and do not necessarily apply to circumstances involving different or additional facts. The NCUA's Office of General Counsel is available to assist the public in determining whether a particular interpretation or opinion remains correct. You can contact the Office of General Counsel at firstname.lastname@example.org or 703-518-6540.
Compliance professionals may want to note that the interpretations selected by the agency as published opinions are just a limited collection of the agency's interpretations on the statutes and regulations within its jurisdiction; there are internal agency interpretive letters and memoranda that are not made available to the public. Also, public opinions available online go back only as far as 1991. The interpretations are also fact-specific so a credit union should be careful in extending a letter's conclusion to its own facts and circumstances. If in doubt about an opinion's applicability, credit unions should contact NCUA's Office of General Counsel (OGC) for assistance in determining whether it may rely on a particular opinion.
NCUA issued two new legal opinions in the month of March. The new opinions are summarized below.
NCUA Opinion 17-1219: Field of Membership (FOM)
On March 9, 2018, NCUA issued an opinion on associational common bonds. In response to a question about whether a federal credit union chartered to serve Anabaptists and Mennonites could also serve "individuals who share a core doctrinal belief and set of practices with those communities," NCUA's OGC concluded that those sharing the same core doctrinal belief "have a significant and meaningful affinity with other members of the Anabaptist tradition," and could thus also be served by the credit union. The opinion noted that such an FOM is a valid associational common.
In 2015, NCUA finalized a final rule that permits federal credit unions seeking to add associations to their fields of membership to apply for streamlined automatic NCUA approval of 12 categories of associations, such as religious organizations, including churches or groups of related churches. Under the rule, which became effective July 5, 2015, NCUA provides automatic approval of such associations, allowing for the federal credit union to receive an immediate electronic confirmation of the approved application.
NCUA Opinion 17-1219 interpreted this rule to conclude that those individuals who share a core doctrinal belief of Anabaptism to "live simply, practice mutual aid with the church, uphold economic justice, and give generously and cheerfully" share a valid associational common bond under NCUA's chartering and field of membership rules.
NCUA Opinion 18-0133: Loan Participations
In another opinion, dated March 22, 2018, NCUA opined that certain requirements of its loan participation rule, 12 C.F.R. §701.22, apply "throughout the life of the loan." NCUA Opinion 18-0133 clarifies several aspects of the loan participation rule, including:
- Each participated loan must be identified and treated independently. For example, a loan participation agreement must identify each participated loan, enumerate servicing responsibilities for that loan, and include disclosure requirements regarding the ongoing financial condition of that loan, the borrower, and the servicer.
- Where a participation agreement involves multiple loans, the documentation for identifying each participated loan can be consist of an addendum or schedule for identifying each loan and each participant’s interest in that loan.
- A loan participation represents an interest in a single loan, throughout the life of a participated loan. This includes servicing. Thus, a servicer cannot deduct a servicing fee related to a nonperforming loan participation from the principal and interest received from a performing loan participation, even when many loan participations are sold to the same purchasing credit union.
- Credit unions are not precluded from engaging in servicing practices for administering multiple loan participations efficiently. For example, netting payments across multiple performing loans would be permissible, assuming proper accounting of each loan’s individual status and the netting is consistent with the loan participation agreement.
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