"The proposed rule will get the NCUA out of the waiver business, and will, within the limits of statutory restrictions imposed by the Congress, give credit unions greater latitude in determining who to lend to and under what conditions," Metsger said.  "Credit unions will no longer have to ask for permission before they make commercial loans."

NCUA Board Member J. Mark McWatters also approved the proposed rule, but did not comment on it. Instead, he briefly urged credit unions that make member business loans to comment on the proposed changes.

"Those who actually extend member business loans, those who understand member business lending and those who get up every morning and do that, I welcome your comments," McWatters said, adding:  "I welcome your comments. I want your comments. We need your comments."

The measure changes the existing MBL rule in four broad areas.

First, it removes the requirement that every business member loan carry a personal guarantee. Matz and Metsger noted that even though the agency's regional offices had been liberal in granting personal guarantee waivers, the fact that waivers had been required at all had often meant that borrowers went to other lenders who did not require the waivers. The proposed rule grants the credit union the power to waive the personal guarantee on member business loans.

Second, the proposed rule will not require credit unions to make sure their member business loans match set loan-to-value limits, in large part because member business loans focus on the member's business operations' ability to repay the loan – not the value of the collateral.

Third, the proposed rule eliminates the existing aggregate loan limits of 15% of the net worth on construction and development loans. It also clarifies and better defines construction and development loans, collateral for those loans and disbursement rules for the construction of buildings.

Fourth, the proposed rule clarifies that participation interests in loans to non-members will no longer count against the statutory member business loan cap.

Read more: A 60-day comment period will open after the rule is published …

The board members said the agency will re-train examiners to support the rule change and proposed the rule go into effect 18 months after the agency finalized it, in order to let both the agency and credit unions to prepare for the change.

The proposed rule will now have a comment period of 60 days after it is published in the Federal Register.

CUNA President/CEO Jim Nussle also cautiously praised the rule, while stressing that member business lending still needs congressional action.

"Credit unions have been making business loans since their inception in the 1900s, yet their ability to lend to businesses is currently stifled. Today, more than 1,000 credit unions are at or near the arbitrary MBL cap put in place in 1998," Nussle said in a prepared statement.

"The NCUA's proposed rule to remove the guarantee requirement, eliminate the need for waivers, remove loan participations against the MBL cap and remove the loan-to-value limits seem like a step in the right direction. CUNA is reviewing the NCUA's proposed principle-based rule and working with our members to assess the real regulatory relief this proposal offers, as well as conducting an economic analysis of the proposed cap calculation change.

"We appreciate the NCUA's interest in making changes to MBL and we know that more can be done – which is why we'll be seeking further action on behalf of our 100 million members. The NCUA's action proves that the regulator wants more flexibility in MBL. It's time for Congress to take action; CUNA and our state credit union associations will continue to work diligently on behalf of our members to seek further MBL change," he concluded.

NAFCU Director of Regulatory Affairs Alicia Nealon expressed concern for the cost of implementing the rule.

"NAFCU has long advocated for MBL reform, and we appreciate the NCUA's efforts to remove prescriptive underwriting criteria and personal guarantee requirements," Nealon said. "While we welcome many aspects of this proposal, NAFCU is concerned with the agency's initial estimates of how much the NCUA will spend to implement the rule. We support necessary and thorough examiner training, but we urge the NCUA to keep it within the agency's current budget and look for all cost savings opportunities."

The NCUA board also reviewed and approved a new final rule on flood insurance; a final rule implementing a Minority Depository Institution Preservation Program; a new interagency policy on diversity, which will be voluntary for credit unions; and the proposed implementation of more regulatory review. It also kept the annual percentage rate cap for federally chartered credit union at 18%.

NASCUS President/CEO Lucy Ito weighed in cautiously as well noting that the goal of streamlining rules and providing flexibility to credit unions is generally good, but that NASCUS will need to scrutinize the details.

"NASCUS applauds the proposed rule's recognition of existing state-specific rules and the options for addressing states' authority going forward. We will likely recommend that NCUA still defer to state-specific rules – and insist that, as guidance is developed for state credit unions to follow in eventual implementation, state regulators participate in its creation, a method consistent with a "principles-based" approach to regulation. States must have a meaningful ability to tailor business lending rules specific to their communities," she said in a prepared statement. "There's no question that member business lending is a complicated topic. We will carefully consider NCUA's proposal, which is the next step in a long, thoughtful process that has included an ongoing dialogue between NCUA and state regulators. We look forward to continued, constructive discussion during and after the public comment period."

Connecticut, Idaho, Illinois, Maryland, Mississippi, North Carolina, North Dakota, Ohio, Oregon, Texas, Utah, Washington and Wisconsin have separate MBL rules for state chartered credit unions, NASCUS said.