LAS VEGAS — With descriptions such as “frighteningly vague,” abacklash against the criteria for member business loan waiversswelled on Thursday afternoon.

During a session on MBL program updates held during NACUSO'sannual conference at the Encore Las Vegas, Vin Vieten, NCUA program officer for member business lending,listened to the frustrations from some of the attendees on thewaivers.

According to the NCUA, credit unions have the right to requestwaivers from certain parts of the agency's rules and regulations.The waivers fall into two categories: an individual transactionwaiver for an individual or specific list of loans and a blanketwaiver of a specific regulatory requirement.

Before applying for a waiver, a credit union should have sevenqualifications in place including having a MBL program for at leastfive years and a composite CAMEL code rating and management andasset quality component ratings of 1 or 2 for the last twoconsecutive exams.

“The criteria for the MBL waivers are frighteningly vague,” saidone attendee at the session.

At least two others told Vieten they've experiencedinconsistencies with NCUA regional directors in different regionson some of the waiver's criteria.

“The problem is some regional directors know how to deal withauto and consumer loans but they've never heard of MBLs,” said oneattendee from a credit union that deals with the niche lendingproduct of taxi medallions.

Vieten said, “We're addressing inconsistencies between theregions.”

“We're so focused on the rule–and we should be. But if you havean LTV issue, you have a risk issue. Address the risk issue,”Vieten said. “When there's a need for a waiver, should that be acause for alarm? Hopefully, any concerns are addressed beforeapplying for a waiver.”

Brian Lauer, a partner with Messick & Lauer PC in Media,Pa., said the law firm is hearing from many credit unions who'vesaid NCUA regional specialists are saying don't even botherapplying for the waivers given the red tape and processing time ittakes.

After other attendees expressed additional concerns with thewaiver process including more stories of inconsistencies within theNCUA's five regions, Bill Beardsley, president/CEO of commercial lending CUSOMichigan Business Connection, probably asked the most poignantquestion.

“Does this all mean the NCUA doesn't want us to do waivers?” hewondered.

Vieten said the seven waiver qualifications, which include beingwell capitalized and having a positive trend in earnings, arethings credit unions should be doing anyway.

The most common waiver requests deal with loan-to-value,personal guarantee and associated borrower issues, Vietennoted.

The words “personal guarantee” prompted several groans fromattendees in the room. Vieten acknowledged that he's hearing thatcredit unions are missing out on lending opportunities here.

The NCUA has said a personal guarantee by the principal offersadditional financial support to back the loan, but more importantlysolidifies the long-term commitment by the principal to the successof the borrower.

NCUA regulation Part 723.7(2)(b) requires “Principals, otherthan a not for profit organization as defined by the InternalRevenue Service Code (26 U.S.C.501) or those where the regionaldirector grants a waiver, must provide their personal liability andguarantee.”

“I think we've gotten a lot of loans paid back because of thepersonal guarantees,” Vieten said, while aware that the five-yearrelationship with the borrower requirement may get in the way andthe NCUA may need to address this aspect.

Still, for one attendee, he's feeling the sting of the personalguarantee requirement. When asked by how much, he said $60 millionin one day.

At the conclusion of the session, Vieten said he always looksforward to getting out in the field and getting feedback fromcredit unions because he's able to find out what's working andwhat's not.

“The message I want to get across is things are going to change.Are they going to change tomorrow–no,” he explained. “Do what'sright for the borrower. Don't lend them money that they're notgoing to pay back. Build a relationship with the borrower. Be theauthority.”