CUSO Confab Talks Loan Participation Rule
The revised loan participation rule was one of the topics discussed at the Regional CUSO Alliance meeting last week in Cincinnati.
Together, the group represents 15 regional business lending CUSOs, 508 credit unions and an aggregate loan portfolio of $3 billion, according to the alliance.
At its June 20 meeting, the NCUA Board approved several revisions to the loan participation rule, including limiting purchasing credit unions to a single-originator concentration of $5 million or 100% of net worth, whichever is greater.
The NCUA also approved a change that allows federally insured credit unions to establish different underwriting standards for loan participations than they use when originating their own loans. Credit unions will also now have the ability to apply for waivers on certain key provisions of the rule.
At the Regional CUSO Alliance meeting, the only CUSOs that had any issue with the rule revisions were the ones that operate a “closed” shop, meaning they serve a small number of only owner credit unions, said Bill Beardsley, president of Michigan Business Connection, a commercial lending CUSO in Ann Arbor Mich.
These are the ones that are likely to experience issues with the limits imposed by the rule, he added.
“However, the Regional CUSO Alliance helps builds collaborative relationships between CUSOs so our organization may help alleviate this pressure when required,” Beardsley noted.
One of the CUSOs at the meeting said it decided to become the originating lender as a result of the rule and will hold the required minimum 5%, Beardsley said.
“This is a really great use of the flexibility of being a CUSO,” he offered.
Beardsley said the CUSO proposal under consideration is a concern, but most of the RCA members already have very close relationships with examiners.
“So, the lack of current NCUA governance over CUSOs, or the potential that they obtain authority over CUSOs, by itself, is not too much of a practical concern,” Beardsley said.
Meanwhile, the CUSOs in attendance at the RCA meeting said they continue to see very strong credit appetites from credit unions. Some CUSOs noted some discomfort with the loosening lending environment, both by banks and credit unions, Beardsley said. The CUSOs also reported very strong credit results with many enjoying record loan volumes, he added.
The RCA also reviewed its mission statement and guiding beliefs and validated they are still relevant, Beardsley said.
“We’re particularly glad to recognize that our participation principles – know your local market and spread the risk – are really paying off for us and the industry,” he pointed out.
The RCA also elected new CUSO members to the group: Mark Ritter, CEO of Member Business Financial Services in Trevose Pa., and Linda Cooper, president/CEO of The Cypress Group LLC in Orlando, Fla.
The RCA meetings are a great reminder of the value and importance of collaboration, whether it’s between CUSOs, credit unions, or both, said Keith Reed, president/CEO of Cooperative Business Services, a business lending CUSO in Cincinnati.
“We are fortunate to have found so many like-minded MBL CUSOs who desire to do the right thing by their credit union clients and engage business lending is a safe and sound manner,” Reed said.
He added, “I believe it is the collective mission of RCA to work together, not against one another, as we serve our credit unions in a regional marketplace model, maximizing the cost- sharing and knowledge-sharing opportunities that a CUSO model can best deliver for all concerned.”