NCUA Makes Clarifying Amendments to Regulations Addressing Loans and Lines of Credit

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On March 25, 2019, the NCUA published a final rule in the Federal Register, which amends the regulations in 12 C.F.R. Part 701 regarding loans and lines of credit to members of federal credit unions.  The final rule takes effect on April 24, 2019.

The clarifying amendments are largely technical in nature and are intended to make the NCUA regulations more user-friendly.  With respect to the maturity limits requirements for loans made by federal credit unions to its members, the current maturity limits provisions are spread among numerous sections of the regulations, some of which are separated by large amounts of text unrelated to the loan maturity restrictions.  To remedy this, the final rule includes all of the maturity limits requirements applicable to federal credit union loans in one section, 12 C.F.R. § 701.21.

Regarding the treatment of maturities for lending actions that qualify as “new loans” under generally accepted accounting principles (GAAP), the final rule clarifies that the maturity limit is calculated from the new date of origination, and that the final rule applies to any lending action that qualifies as a new loan under the GAAP, whether that action is a new origination or a modification.

Further, the current regulations provide for the various limits on loans to a single borrower or group of associated borrowers in separate sections that address: (i) the general limit; (ii) the limit on loan participations; and (iii) the limit on commercial loans.  As noted in the preamble of the final rule, because these provisions are spread among different sections, for clarity purposes, the final rule adds cross-citations to the more specific loan participation and commercial loan limits in the section that addresses the general lending limit.  According to the NCUA Board, the cross-citations are intended to provide an efficient and user-friendly way to identify and comply with the multiple lending limits in the NCUA regulations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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