March 15, 2019

Loans to members rule adopted as proposed

NCUA Board
NCUA Board Chairman J. Mark McWatters and Board Member Rick Metsger get an update on the agency's loans to members rule before approving it unanimously Thursday.

The NCUA Board on Thursday finalized, largely as proposed, its rule to reform loans and lines of credit to credit union members. NAFCU offered its support of the rule and believes it will positively impact the industry. The board also received a fourth-quarter update on the National Credit Union Share Insurance Fund (NCUSIF).

The loans to members rule stemmed from recommendations made by the NCUA's Regulatory Reform Task Force. It attempts to make the agency's regulations "friendlier" by:

  • identifying in one section all of the various maturity limits applicable to federal credit union loans;
  • stating that the maturity date for a new loan under generally accepted accounting principles (GAAP) is calculated from the origination date of the new loan; and
  • more clearly expressing the limits for loans to a single borrower or group of associated borrowers.

The NCUA Board said it will continue to review comments on potential alternate maturity limits and a potential universal limit on loans to one borrower, though any future changes would be done formally through the rulemaking process. NAFCU, in its comment letter on the proposal, recommended the expansion of loan maturity limits for longer-term mortgage loans on one-to-four family dwellings that are not the "principal residence" of a member. NAFCU also asked the NCUA to expand the 20-year maturity limit for covered home improvement, mobile home and second mortgage loans.

The rule will become effective 30 days after publication in the Federal Register.

NCUSIF Quarterly Report

The NCUSIF ended 2018 with net income of $226.5 million, but its assets declined to $15.8 billion at the end of the year from $16.7 billion at the end of 2017. NCUA Chief Financial Officer Rendell Jones delivered the NCUSIF quarterly report, and also referred to clean audits of the NCUA's four permanent funds; the NCUSIF's audit indicated a distribution would be likely.

As of Dec. 31, 2018, the NCUSIF's equity ratio stood at 1.39, above the normal operating level (NOL) of 1.38 percent. As a result, the NCUA last week announced that it had approved a $160.1 million equity distribution to be paid to credit unions in the second quarter of this year.

NAFCU's widely used SIF distribution calculator is available for members to download here.