A new video posted Monday by the NCUA aimed to provide credit unions with a clearer understanding of member business lending opportunities.
The video outlined the elements of an effective member business lending program. It also highlighted how a well-developed program could benefit credit unions when the correct balance of people, processes and policies were in place.
Designed to provide additional direction after the NCUA passed the MBL rule in February, the video also aimed to help credit unions tailor their MBL programs to their strategic goals and members' needs.
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In the video, NCUA Director of the Office of Examination and Insurance Larry Fazio said while member business lending does pose some challenges for the agency in regard to its supervisory activities, the regulator is preparing a top to bottom update of its examiner training for MBL.
He emphasized that member business lending necessitates greater expertise and strong risk management policies, and cautioned that some credit unions have engaged in ill-advised, high-risk business lending programs or lack the appropriate expertise or capital to manage their programs, which has led to the programs' failure.
Key changes to the final rule included giving credit union loan officers the ability, under certain circumstances, to not require a personal guarantee. The removal of the personal guarantee requirement will be effective 60 days after publication in the Federal Register, while the rule's remaining elements will be effective Jan. 1, 2017.
The other elements of the rule include: Replacing explicit loan-to-value limits with the principle of appropriate collateral and eliminating the need for a waiver; lifting limits on construction and development loans; exempting credit unions with less than $250 million in assets and small commercial loan portfolios from certain requirements; and affirming that non-member loan participations do not count against the statutory member business lending cap.
The video can be accessed here.
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