UPDATED: NCUA final rule clarifies credit union lending regs, effective 30 days after publication

This story has been updated to link to the scheduled March 25 Federal Register notice of final rule.

Final credit union loan rule changes that regulators say will reduce regulatory burden, improve clarity and ease compliance were approved by the National Credit Union Administration (NCUA) Board during its open meeting Thursday on a vote of 2-0.

The final rule, effective 30 days after publication in the Federal Register, does the following:

  • identifies in one section all maturity limits that apply to different types of federal credit union loans;
  • clarifies that the maturity date for a “new loan” under generally accepted accounting principles (GAAP) is calculated from the new date of origination; and
  • regarding the limits for loans to a single borrower or group of associated borrowers, provides cross-citations to the specific loan participation and commercial loans limits in the general limit section of the regulation.

These provisions were adopted largely as proposed last August. And more rulemaking could be ahead, though the agency hasn’t indicated just when that might happen.

In addition to offering rule clarifications, the August proposal invited comments on whether some loan maturity limits should be made longer; and on whether there should be a single universal limit on loans to a single borrower or group of associated borrowers (rather than basing limits on the loan type).

On the first point, input was sought on (1) the current 40-year maturity limit on long-term residential real estate loans where the 1-4 family unit is the principal residence of the borrower; (2) the case-by-case exception the Board can use to grant maturity limits that exceed 40 years on long-term residential real estate loans; and (3) the 20-year maturity limit for covered home improvement, mobile home, and second mortgage loans. The proposal only sought comment; it didn’t present specific rule changes, but the final rule notice states that the agency board is considering the feedback received and whether to issue a proposed rule at a later date.

NCUA also says about half of commenters specifically addressed a potential universal limit, but they had mixed views. “The NCUA will continue to evaluate the comments received and determine whether a single universal limit would be beneficial,” the notice states. “If the Board determines that a universal limit should be adopted, the Board will issue a proposed rule at a later date pursuant to the NCUA’s normal notice and comment rulemaking process.”

Loans to Members and Lines of Credit to Members