NCUA Paves The Way For Purchases of Mixed-Use Buildings

April 22, 2016 at 7:30 am Leave a comment

At Chairwoman Matz’s last NCUA board meeting yesterday, a proposal was forwarded that will give federal credit unions greater flexibility to occupy buildings with retail space. It also explains in quantifiable terms when a building purchased by a credit union is “partially” occupied.  This might not sound all that exciting, but NCUA’s fixed asset rules have been among the most needlessly troubling mandates with which credit unions have had to deal.

Let’s say your credit union wishes to buy property located at a prime street corner location. The building not only includes space for a branch but has retail and residential space on its upper floors. Presently, FCUs must have plans to fully occupy the building. During the meeting, Chairman Matz pointed out that this means credit unions can only buy mixed-use property if they plan to evict the other occupants.  When this regulation is finalized, this will no longer be the case so long as a credit union has plans to use at least 50% of the building within six years.

Let’s say you aren’t interested in a mixed-use building but are looking to move your headquarters to a bigger space. Under existing regulations, a federal credit union must “partially” occupy property within six years of acquisition.  However, there is not a quantifiable definition of when a building is partially occupied.  Once this Reg is promulgated, you will be complying with the law provided at least 50% of the property is occupied within six years.

NCUA deserves a thumbs-up on this one. Here is the proposal.

https://www.ncua.gov/About/Documents/Agenda%20Items/AG20160421Item2c.pdf

Better Late than Never

One of the lessons drawn from the Great Recession was that CEOs shouldn’t have compensation plans that incentivize short-term and\or reckless behavior. So, Section 956 of the Dodd Frank Act requires federal banking regulators to issue joint regulations “not later than 9 months after the date of enactment of this title,” (I wonder if I could be this late on my taxes?) or “guidelines” to require financial institutions to disclose to the appropriate Federal regulator the structures of all incentive-based compensation arrangements offered by such covered financial institutions. This is the second time the regulators have taken a swing at crafting regulations for this provision.

The good news is that the proposal just applies to credit unions with at least $1 billion in assets. According to NCUA’s summary of the proposed regulation, impacted credit unions will have to, among other things, ensure that any new compensation incentives be approved by a credit union’s board of directors or a committee appointed by it. They will also have to give examiners all  on-site records maintained on  compensation plans. Here is the summary: https://www.ncua.gov/About/Documents/Agenda%20Items/AG20160421Item2c.pdf

On that note, the Blogger Formally Known As Henry is off to Party Like It’s 1999. Enjoy your weekend.

Entry filed under: Compliance, Regulatory. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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