WASHINGTON — If a federal credit union gets back waived settlement costs and fees from member business loans it is not considered a prohibited prepayment penalty, the NCUA stated in a legal opinion.The FCU can recoup waived settlement costs "as long as the recoupment period is reasonable in terms of the size and type of fees being waived," NCUA Associate General Counsel Sheila Albin wrote in a letter to CUNA Senior Vice President and Deputy General Counsel Mary Dunn.In the past, federal credit unions were concerned that the waived fees would not be offset by interest income during the first year and wanted to mandate the borrower repay the waived fees if they repaid the loan within the first year.Albin said the agency agreed with CUNA's interpretation that a fee due when a loan is paid off should be treated similarly as a fee due at or before loan closing"if the back-end fee is one charged regardless of whether the MBL is paid early or at maturity."

Loans for Undeveloped Land Are C&D

WASHINGTON — Loans made for buying undeveloped land are construction and development loans, even if the loan won't be used to develop the property, according to a recent NCUA legal opinion.Even if the borrower has no intention to use loan proceeds to develop the land, or rely on income to service the debt, if the borrower's ability to repay the loan is tied to obtaining a second loan, the first and second loans are tied together and are both classified as C&D loans, NCUA Associate General Counsel Sheila Albin wrote. The letter was in response to an inquiry by Bruce Beaudette, president/CEO of Sunmark Federal Credit Union in Albany, N.Y.She noted that C&D loans are the riskiest kind of MBL and are therefore subject to stringent statutory and regulatory limits: the borrower must have at least a 25% equity interest in the project being financed and the cap on C&D loans is limited to 15% of a credit union's net worth.