NCUA has started to make in-roads regarding regulatory relief in a surprising way. At their recent board meeting, NCUA announced a proposed rule to ease regulatory restrictions impacting member business loans (MBL). Under the proposal, credit unions would be able to tailor their underwriting requirements more specifically to their community and their credit unions’ situation when setting their MBL policies and procedures. The proposal allows loan officers to waive the personal guarantee, does not set specific loan-to-value limitations, clarifies that non-member loan participations will not count against the statutory business lending cap and lifts certain limits on construction and development loans.
Keep in mind regulations never disappear completely. While the proposal loosens the reins on specific limitations it still contains strong language that requires credit unions to keep safety and soundness top of mind. The proposed rule requires credit unions to establish their own policy with internal limitations commensurate with the level of risk of the activity. It specifically requires credit unions to attach collateral that is appropriate based on the size and type of commercial loan, among other conditions.
If your credit union engages in commercial lending or has been considering adding it as a product, your comments on this proposal will be critical. It is a rare occurrence that this level of change to NCUA Rules and Regulations 723 is open for comment so please take advantage!