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ALEXANDRIA, Va.-CUNA Mutual has been working for more than a year with numerous players in the credit union community to develop a pilot for a member business lending investment program. During the NCUA Board’s closed meeting last week, the board approved the launching of the pilot program that CUNA Mutual hopes will help credit unions diversify their portfolios as well as interest them in business lending. CU Systems Funds (TM) is a private investment fund that will purchase business loans from credit unions and sell shares in them to interested credit unions, said CUNA Mutual’s Credit Union Financial Solutions Group Vice President Kevin Thompson. CUNA Mutual is putting up $25 million in seed money to get the program rolling and has already purchased one loan with several more in the pipeline, he said. “Once we meet our diversification standards for sourcing loans in the fund, we will make shares available to investor credit unions. We expect to be selling shares in the fund by May,” Thompson projected. For the time being, the pilot is limited to $1 billion. Once the fund reaches that amount, CUNA Mutual will come back to NCUA to expand it. “Clearly NCUA’s desire is to move that into regulation status,” Thompson said. Exiting the closed meeting, both NCUA Board members said they welcomed the innovative program. “We look forward to reviewing the progress of the program and how credit unions benefit from this secondary market alternative,” NCUA Chairman JoAnn Johnson said. “This innovative pilot program is designed to diversify the risks for credit unions investing in member business loans,” NCUA Board Member Debbie Matz noted. She added that the parameters of the pilot will limit risk to investors, “require a meaningful participation stake for sellers,” and set high industry standards. Thompson also pointed out that the new fund will help keep credit union loans within the credit union system. The benefits of that are relatively high quality loans and encouraging credit unions to explore business lending as an option. “It should help encourage and grow business lending in several ways,” he said. First, the fund will act as a source of liquidity for credit unions already involved in business lending so they can make more loans. Second, it could help those considering business lending get their feet wet and the MEMBERS Business Solutions certification as a business lender and underwriting standards provide the credit unions a good road map. Finally, the exposure to credit unions not currently involved in business lending could help them decide to open up their own shops if it is right for their particular field of membership, Thompson explained. He said that in discussions with NCUA, CUNA Mutual stressed that this pilot could eventually be applied to other types of credit union business, such as credit card portfolios. [email protected]

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