What is the reduced compliance burden, as a result of Thursday’s new NCUA rules, worth to credit unions?
About $8 million.
This, according to statistics published in the Board Action Memorandum that introduced the final rules on troubled debt restructured loans.
Federally insured credit unions currently spend an average of 15 minutes per month manually calculating and reporting the past due status on each TDR loan. Unlike other loans, TDRs must currently be reported as delinquent until six consecutive on-time payments are made, even if payments are current.
Because most core systems don’t differentiate between an original loan and a TDR, credit unions had to manually compute delinquency rates for Call Reports. The new rule, which goes into effect June 30, allows TDRs to be reported as current if payments are on time, which eliminates the dual reporting requirement.
Multiply the manual reporting burden by more than 150,000 TDR loans as of Sept. 30, 2011, and the rule burns more than 450,000 man hours each year.
Credit unions will have to devote time to writing newly required TDR policies, which the NCUA estimates will take an average of eight hours. When that new burden is subtracted from the time savings, credit unions come away with approximately 400,000 net saved man hours per year.
Patelco Credit Union Chief Financial Officer Scott Waite, who assisted NCUA in developing the new rules, said if you take those 400,000 hours and multiply them times $20 an hour, an average accountant’s salary, it means $8 million savings for federally insured credit unions.
Not only does that help a credit union’s bottom line, he said, but it also frees up accounting staff. The dual reporting required 15 hours a month at the $3.7 billion Patelco, Waite said, adding that his shop doesn’t have as many TDRs compared with total loans as other credit unions.