Credit union regulator extends loan participations temporary rule, issues trio of proposals, sets savings insurance fund operating level

In other action at the Thursday meeting of the National Credit Union Administration (NCUA) Board, it issued one final rule and three proposed regulations – with three of those approved on split votes, and with Board Member Todd Harper (the lone Democrat appointee on the board) voting in opposition all three times.

The board:

  • Approved (unanimously), an extension to Dec. 31, 2021, for a temporary final rule that increases the maximum aggregate amount of loan participations that a federally insured credit union (FICU) may purchase from a single originating lender without seeking a waiver from NCUA to the greater of $5 million or 200% of the FICU’s net worth (up from the greater of $500 million or 100% of the FICU’s net worth). The rule had been slated to expire at year’s end. The temporary rule, adopted by the NCUA Board as a relief measure for credit unions in the midst of the coronavirus crisis last spring, took effect April 21.
  • Issued a proposed rule (on a 2-1 vote) on field of membership shared facility requirements (under Part 701, Appendix B, of agency rules) that NCUA said is intended to modernize requirements related to service facilities for multiple-common-bond federal credit unions (FCUs). NCUA said the proposal includes any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple-common-bond FCU that participates in a shared branching network. “The FCU need not be an owner of the shared branch network for the shared branch or shared ATM to be a service facility,” the agency said. “These changes would apply to the definition of service facility both for additions of select groups to MCB FCUs and for expansions into underserved areas.” Harper said he questioned the proposal’s ability, without changes, to increase service to underserved areas. The proposal will have a 30-day comment period.
  • Released a second proposed rule (on a 2-1 vote), this one on mortgage servicing rights (under Parts 703 and 721 of agency rules), which would amend the agency’s investment regulation to permit FCUs to purchase mortgage servicing rights from other federally insured credit unions subject to certain conditions. Harper called the proposal “half baked” but said he could find a way to support a final rule if changes were made. The proposal will be issued with a 30-day comment period.
  • Advanced yet a third proposed rule – this one on overdraft policy (under Part 701 of its rules) – which also was adopted on a 2-1 vote. The proposal would remove the requirement that an FCU’s written overdraft policy establish a 45-day time limit for a member to either deposit funds or obtain an approved loan from the FCU to cover each overdraft, replacing it with a requirement that the written policy establish a specific time limit that is “both reasonable and applicable to all members for a member either to deposit funds or obtain an approved loan from the FCU to cover each overdraft.” In May, the board tabled a proposed interim final rule to let FCUs decide how long members have to resolve account overdrafts. The proposal was tabled after failing to win a second from one of two board members when Chairman Rodney Hood asked for it (both members Harper and McWatters expressed opposition to a final rule). Back in May, Harper said the rule would (among other things) allow credit unions to garnish members’ income – including any economic stimulus relief funds – to pay off overdraft debt. Harper reiterated his objections. (“I couldn’t support it then, I can’t now,” he said.) Comments are due 30 days after publication in the Federal Register.

The board also set the “normal operating level” for the National Credit Union Share Insurance Fund (NCUSIF) at 1.38 for the coming year, no change from 2020. The NOL represents the target level of reserves in the fund relative to shares insured (referred to as the equity level). Generally, it is the level of reserves the board believes is needed to deal with anticipated losses from credit unions (if any) throughout the year, without lowering the reserving rate below 1.20%, the point at which an insurance premium would be required.

Along those lines, staff told Harper that it estimates the equity level of the fund at year-end will be 1.32% – well above the level at which a premium would be required. Agreeing with staff that chances of a premium in 2021 now look “next to zero,” Harper said that would be “welcome news to many credit unions.”

Temporary Final Rule, Regulatory Relief in Response to COVID-19

Proposed rule, Field of Membership Shared Facility Requirements

Proposed Rule, Mortgage Servicing Rights

Proposed Rule, Part 701, Overdraft Policy.

Board Briefing, Share Insurance Fund 2021 Normal Operating Level