NCUA Gives Credit Unions Greater Workout Flexibility

November 20, 2020 at 10:11 am Leave a comment

In a nod to reality at yesterday’s board meeting, the NCUA proposed amending its regulations to authorize credit unions to capitalize interest in connection with loan workouts and modifications. To help guide credit unions in using this new authority, the board is further amending Appendix B to Part 741 to define the capitalization of interest as “the addition of accrued but unpaid interest on the principal balance of a loan.” But assuming the regulation is finalized, please read it closely as NCUA is including several restrictions which will make it easy for your examiner to look over your shoulder when making these loans. As the board explains in the preamble:

The Board underscores that in proposing to remove this prohibition, it would maintain several requirements that apply to all loan workout policies in Appendix B. For example, the Appendix establishes the expectation that loan workouts will consider and balance the best interests of the FICU and the borrower, including consumer financial protection measures. Ensuring the best interest of the borrower prohibits predatory type lending practices such as including loan terms that result in negative amortization. In addition, a FICU’s policy must establish limits on the number of modifications allowed for an individual loan. Further, the policy must ensure that a FICU make loan workout decisions based on a borrower’s renewed willingness and ability to repay the loan.

Premium Increase on the Way

At yesterday’s board meeting, Todd Harper made it clear that it isn’t a question of if, but when, NCUA will be assessing its share insurance fund premium to credit unions. Stay tuned. 

And The Band Played On…

Pandemic-inspired lockdowns be damned- the homebuying industry continues to boom. According to the most recent survey released by the National Association of Realtors, existing home sales grew for a fifth consecutive month in October to a seasonally adjusted rate of 6.85 million, which is a 26.6% increase from this time last year. Furthermore, the median existing home price is now $313,000 which is 16% more than the comparable price in October 2019. The armchair economist in me can’t help but think that this is one of the starkest examples to date of why this country remains so divided. For those of us who can work remotely, low interest rates and rising home values provide a silver lining to the pandemic. The same cannot be said for the “essential” worker packing groceries for minimum wage at Price Chopper.

A Good Binge-Watch on Netflix

Not that you asked, but for those of you looking for a new show to binge, I would suggest giving The Queen’s Gambit a chance. You don’t have to like chess to like the show, and since you won’t have quite as much turkey to prepare this year, you’ll need something to do to kill the time. 

Entry filed under: Regulatory.

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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