Johnson Finds Hard Work, Not Media Attention, Gets the Job Done

ALEXANDRIA, Va.-Yearling NCUA Board Member JoAnn Johnson has been too busy doing her job to worry about tooting her own horn much. “I’m not here to make headlines; I’m here to make good policy,” she said. One of her top priorities during her time on the board has been to update the agency’s member business lending regulation. NCUA’s legal staff has been working to integrate portions of the member business lending regulations brought to the board by some states into the federal rule. The attorneys found three areas-principle guarantees, unsecured member business lending, and equity requirements for construction and development loans-where NCUA could bring the federal level even with the state amendments. Three states have brought member business lending regulations before the board since she joined the agency, Johnson pointed out, for a total of seven. She said a couple more may be interested but could be waiting to see what NCUA does. However, she said she felt NCUA’s review of the member business lending rule could go well beyond the scope of parity with recent state provisions. “Maybe this isn’t all we can do.I asked the chairman if he would delay that on the board agenda,” Johnson said, of which NCUA Chairman Dennis Dollar was receptive. In November, she initiated a task force to study the issue, which has been consulting with CUNA, NAFCU, and the state supervisors. Prior to that, she took partial credit, due to her discussions with the credit union community to bring unnecessary regulatory hurdles to the agency’s attention, for the NCUA Board’s notation vote Oct. 15, making technical clarifications to the member business lending appraisal rule increasing the appraisal requirement from $50,000 to $250,000, including member business loans involving real estate. Johnson said she is looking at about seven or eight areas where the regulation could be modified, but was reluctant to discuss them all publicly yet. She did reveal that the agency’s legal staff is looking into: * Allowing CUSOs to offer member business loans; * Clarifying whether a participation in a business loan is taken off a credit union’s books after selling it; and * Reconsidering the treatment of some business loans under Prompt Corrective Action rules. With regard to PCA rules, Johnson explained that currently business loans up to 12.25% of assets are reserved at 6%. Beyond that, credit unions with exemptions must reserve at 14%. She said that NCUA is looking into the rationale behind the reserves and whether the numbers can be changed. “Member business lending isn’t for everybody,” Johnson acknowledged. “We recognize the additional risk.” However, she said that credit unions she has spoken to across the country have expressed excitement about her ideas. Johnson said NCUA hopes to have a proposal out in time for the February board meeting. She emphasized that Small Business Administration-backed loans are not necessary to do business lending, but they do help increase lending and mitigate risk. Johnson noted that the SBA-backed portion of business loans does not count toward the cap and if the remainder is under $50,000, it would not count as a business loan. The board member added that SBA’s move toward smaller loans could be a positive for credit unions. “Who can better fill than niche than credit unions?” Johnson asked rhetorically. As for grabbing some headlines, Johnson said, it is nice for credit unions to know what she is doing, but she said her philosophy is that it is better accomplished by elbow grease. “Those who say the least are heard the most,” she quoted as being the best advice she received while serving in the Iowa State Senate. One issue that Johnson has sponsored that has gotten little media play, but she feels is important, came out of the last board meeting. With the announcement of changes to the definition of a small credit union at the November board meeting, NCUA also decided to publish the list of regulations the agency is going to look at as part of its annual review of a third of the regulations, so the credit union community can study them and make recommendations. “Nobody has a monopoly on good ideas,” Johnson stated. Over the past year, one of the most interesting things about credit unions, Johnson said, is how they adapt to their individual communities. She said when she served in the Iowa Senate, she saw a huge billboard for credit unions driving into the capital, while she has heard other stories of credit unions opening branches in the local grocery store or walking through neighborhoods placing door hangers to let people know they are eligible for membership. She added that bankers do not have the challenge of letting people know they are eligible for membership. Field of membership regulations have been a recent quandary for the credit union community. While the agency is working to expand FOM powers, the bankers are trying to squash them. According to Johnson, “Any opportunity to belong to a credit union should be made available.” Though she has no specific suggestions for adding to NCUA’s recent FOM proposal, she still does not feel the agency has reached the parameters as Congress outlined. Johnson said she fully expects the bankers to challenge the rule if it is finalized and that NCUA is well within its legal bounds. [email protected]