BOSTON – For the fourth time in eight years, the Massachusetts Division of Banks is looking at making changes to the state's parity with Federal Credit Union regulation that would give state-chartered credit unions greater parity with federal credit unions. The state agency will hold a public hearing April 18 concerning the adoption of proposed amendments to the Parity with Federal Credit Unions regulation that would give state-chartered credit unions broader lending and participation authorities as well as investment authorities. Among the provisions under lending and participation authorities, the proposed amendments would: * amend residential mortgage loan definition to include manufactured home loans; * add the term "recreational vehicles" to the authorities for 20-year loans for boats, campers and trailers; * authorize boat, camper, trailer and recreational vehicle loans to be indirect loans; * clarify mortgage loan authority to include subsequent liens, not only second liens; * amend consumer loan participation authority to extend beyond the commonwealth and include government agencies; * amend nonresidential loan participation authority to extend beyond the commonwealth and include government agencies; * amend certain authorities requiring notice to the division by credit unions that had previously received approval under the parity regulations to no longer require notice to the division and to include a percentage of unimpaired capital and surplus; * amend certain authorities requiring notice to the division by credit unions that had not previously received approval under the parity regulations to include a percentage of unimpaired capital and surplus. Concerning investment authorities, the proposed amendments: * add a new category of nonmember deposits to the limitations specified; * add additional investment authorities, including repurchase transactions, securities lending transactions, borrowing repurchase transactions including reverse repurchase transactions, and federal funds from any financial institution insured by the FDIC or NCUA; * increase investments in land, building, improvements and equipment from $300,000 to $500,000. It also includes miscellaneous provisions and technical amendments. According to Dan Egan, president/CEO of the Massachusetts Credit Union League, the state credit union law was changed in 1998 to allow for parity regulations to be submitted by the commissioner for approval and review on an on-going basis. Egan said the commissioner has since gone through three reviews, making the latest one the fourth. The recommended amendments are based on requests the league submits for parity review based on comments the league receives from CUs and its analysis of changes in federal CU law that don't exist in the state law. There are currently 249 credit unions in Massachusetts of which 105 are state-chartered. "The process of parity is important because there should be an on-going healthy competition between the state and federal charters based on which one provides better operating opportunities for credit unions," said Egan. "From the perspective of the commissioner, he sees as part of his obligation for regulating financial institutions maintaining a competitive charter. Also, Massachusetts was the first state to have a general credit union charter law, so there's a historic need to maintain the viability of the state charter. In addition, from the standpoint of state-chartered credit unions having the ability to operate effectively for Massachusetts' consumers you need a viable state charter," he continued. Egan also pointed out that the Division of Banks is a self-funding division within the state government and its primary income is derived from the state examination of state-chartered institutions. Looking back on the three earlier reviews of the parity regulations, Egan recalled that loan limits were a major issue, especially with mortgage loan limits. "The good thing about having a credit union law established in 1909 is you have the reputation that it was the first law. The downside though is it's so old. There are many aspects of the state law that still reflect a more paternalistic attitude towards state-chartered credit unions than would otherwise be considered appropriate," said Egan. The league president said bankers in the state have in previous years opposed the commissioner's efforts to amend the parity regulations, but they've been unsuccessful. Egan doesn't expect this year to be any different. The bankers' opposition, he said, is based on their traditional political arguments such as CUs being tax-exempt entities, rather than any specific objections. Still given that, Egan says the chances of the amendments being approved "are still good," and he doesn't think there will be any changes to them because, he said, "they're really not that controversial. Anyway, the commissioner is satisfied that safety and soundness issues have been taken into consideration and that they don't contradict state law." The Massachusetts Credit Union League will be represented at the public hearing by its general counsel Mary Ann Clancy. -

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