Eight key portions of legislation enacted in late March to bolster the economy (including workers and businesses) that affect credit unions and their operations are outlined in a Tuesday letter to the institutions from their federal regulator.
The National Credit Union Administration (NCUA), in its letter to federally insured credit unions (LTCU 20-CU-07), said the key provisions for credit unions of the Coronavirus Aid, Relief and Economic Security Act (CARES Act):
- deal with the agency’s Central Liquidity Facility (CLF, a facility designed to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls);
- raise the threshold for insured deposits;
- provide temporary relief for troubled debt restructurings (TDRs);
- establish the loan guarantee “Paycheck Protection Program”;
- provide optional, temporary relief from the current expected credit losses (CECL) accounting standard issued by the Financial Accounting Standards Board (FASB);
- extend credit protection to borrowers (such as reporting loan modifications resulting from the impact of the pandemic as “current” or as the status reported before the accommodation, unless the consumer becomes current);
- impose a moratorium on single-family mortgage foreclosures and establish a right for consumers to request forbearance;
- provide up to 90 days’ forbearance for borrowers with a federally backed, multifamilty mortgage loan experiencing a financial hardship.
In outlining the amendments to the CLF borrowing facility, the NCUA noted that the changes “can help provide significant liquidity support to the entire credit union system as we work through the COVID-19 pandemic.”
The changes include provisions that:
- Remove the “primarily serving natural persons” reference under the Federal Credit Union (FCU) Act’s definition of “liquidity needs” to permit temporary access for corporate credit unions in addition to natural-person credit unions.
- Amend the act’s membership provision for the CLF to provide greater flexibility to corporate credit unions serving as agent members with respect to the amount they must pay to subscribe to the capital stock of the CLF.
- Alter the FCU Act provision regarding member applications for extensions of credit by removing the reference to the NCUA Board disapproving applications that are filed with the intent to expand credit union portfolios. “Instead, under the CARES Act, the applicant must provide evidence to the Board that they have made reasonable efforts to first use primary sources of liquidity, including balance sheet and market funding sources, to address its liquidity needs,” the agency said.
- Temporarily increase (by 16 times the subscribed capital stock and surplus of the CLF) the NCUA’s borrowing authority on behalf of the facility. “Together, these amendments enhance the CLF’s ability to serve as an effective liquidity provider to credit unions,” the agency said.
The agency noted that the amendments sunset on Dec. 31.
NCUA Letter to Credit Unions (LTCU) 20-CU 07: Summary of credit union provisions in CARES Act