ARLINGTON, Va. – Both CUNA and NAFCU sent comment letters to NCUA Jan. 25 expressing their respective support for the agency’s proposal to include the Office of General Counsel’s legal opinion into NCUA’s lending rules (Proposed Rule 701.21, Loans to Members and Lines of Credit to Members). At its Nov. 18, 2004 board meeting, the NCUA Board issued a proposed amendment to 701.21, NCUA’s lending regulation, to include recent Office of General Counsel interpretations regarding loan maturities and loan guarantees. NCUA’s proposal clarifies: the conditions for applying the lending rule to loans secured by mobile homes, recreational vehicles, house trailers and boats; that loans with a partial government guarantee, insurance, or advance commitment to purchase a portion of a loan fall within the rule; and that loans secured by manufactured homes may be considered residential real estate loans. Under the current lending rule, this is controlled by restrictions on loan maturities, rates of interest, security and prepayment penalties that apply under the Federal Credit Union Act which prohibits FCUs from granting loans with maturities of greater than 12 years. The proposal would clarify that a loan for a house trailer, recreational vehicle or boat that is secured by a first lien and qualifies for the home mortgage interest deduction, would be eligible for a maximum of 20 years maturity. In her letter to NCUA’s Mary Rupp, secretary of the board, CUNA SVP and Associate General Counsel Mary Mitchell Dunn stated that, “CUNA supports the proposal, which we feel is fully consistent with the Federal Credit Union Act and sound public policy. The changes will provide additional flexibility to federal credit unions and facilitate the ability of credit unions to serve their members’ lending needs.” Dunn further wrote that, “the Federal Credit Union Act does not expressly state the extent to which a loan must be guaranteed or insured in order to avoid its lending limitations.” NAFCU President/CEO Fred Becker voiced a similar opinion in his letter to Rupp, stating that, “We believe that FCUs should have the flexibility to make loans with the terms and conditions that match the terms and conditions of the government program that is insuring or purchasing the loan regardless of whether it is a full or partial guarantee. This change will also enable FCUs to participate more fully in Small Business Administration lending programs.” NAFCU further recommended NCUA make two clarifications to the rules regarding manufactured housing. NAFCU agrees with the OGC that due to the improved quality of manufactured housing, loans should qualify for longer maturities of residential real estate. However in cases when a member-borrower leases and does not own the land on which the house is situated, NCUA stated in an opinion letter that the FCU should ensure that the lease is as long as the loan, and that the land owner and FCU should have an agreement as to cooperation in case of foreclosure. NAFCU recommends NCUA incorporate this guidance into the lending rule itself to provide a uniform standard for FCUs. NAFCU also suggests that the lending regulations should state that manufactured housing that is not affixed to land constitutes a mobile home and is subject to the maturity limits in 701.21(f). -

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