A line of credit from a credit union to a mortgage company is a member business loan because the company assigns liens to family dwellings to secure the line of credit, NCUA Associate General Counsel Sheila Albin wrote in a legal opinion.
The company would use the line of credit to fund mortgage loans, and, therefore, "does not qualify for the MBL exception," she wrote.
According to NCUA regulations, there are five exceptions to the general rule on MBL, including a "loan fully secured by a lien on a one-to-four family dwelling that is the member's primary residence."
Albin said that in the regulations outlining exceptions, "borrowers," refers to "the "MBL borrower and not persons without an obligation to the FCU under the MBL. Even if the company's homebuyers are FCU members, they are not borrowers under the MBL, but under a separate loan agreement with the [mortgage] company."
She wrote the letter to Joseph Simon, an attorney at the Garden City, N.Y., law firm of Cullen and Dykman. The letter did not name the mortgage company or the credit union.