MIDDLETOWN, Pa. – The number of credit unions certified to invest in a new mutual fund comprised of member business loans continues to grow.

North Island Credit Union recently became the 20th credit union certified through CU BizSource, LLC, a member business lending CUSO that provides the certification process to invest in the CU System Fund. Launched in March 2005, the fund was created by CUNA Mutual Group to allow for the purchase of business loans from credit unions and the sale of shares in them to other interested credit unions. Each certified originator is limited to selling up to 10% of the total value of the fund. The loan amounts are generally between $250,000 and $1 million. CUNA Mutual provided the initial $25 million to help launch the fund.

Today, the fund has $40 million invested and $15 million worth of shares have been sold, said Mark Taber, president/CEO of CU BizSource. The goal is to have 30 credit unions certified and $90 million invested by the end of 2006.

“We are pleased to see so many outstanding organizations using underwriting and documentation standards aimed at delivering business loans to members that are sound for both the member and credit union,” Taber said.

Taber said the program is designed for those that have been delivering member business services for at least five years, have had positive loan reviews from NCUA, state regulators and other third-parties, a seasoned team of lenders, underwriters and operational staff and stringent controls through polices and procedures.

Credit unions and CUSOs pay a flat fee of $2,000, which covers all costs CU BizSource incurs for the certification process, Taber said. This fee may be waived if it is determined through the preliminary review that credit union basic requirements have not been met for certification. If a third-party loan review team is needed to assess those that may need further investigation, a $5,000 fee is assessed. If a certified credit union presents an acceptable loan to the fund within 30 to 60 days of being certified, the $2,000 fee will be offset by CU BizSource, Taber said.

“Most of them have been able to do this because they're almost at the 12.25% (MBL cap),” he said.

In the preliminary certification phase, CU BizSource requests a current copy of the MBL policy and procedures manuals, the most current NCUA or state regulator's MBL examination report, the most recent external or internal audit of the MBL function, if available, five loan presentations and financial spreads less than 12 month old, and an organizational chart with rsums of the MBL management and lending team. CU BizSource will then review all the documentation, which typically takes up to two weeks.

The next phase involves determining whether a third-party loan review team will need to make an on-site visit. The entire process can take 30 days on the short end and 60 days on the long end, Taber said, adding much of it depends on how quickly the documents are provided by credit unions or CUSOs in the first phase.

Taber said a handful of credit unions required on-site visits while one new “niche” lending credit union was turned down because it had not hired someone with enough lending experience needed. Taber is hands-on having visited two credit unions and at press time, was gearing up to visit another in California. He joined CU BizSource in January bringing 15 years of experience, which includes chief credit officer of what is now US Bank, accounting and consulting and seven years of teaching at CUNA's commercial lending schools.

CU BizSource is in the final testing stage of a Web-based platform for a national participation market for MBLs, Taber said. The way it works is a certified credit union or CUSO can present loans to the platform. CU BizSource is currently lining up buyers on the buy side that are interested in participations. Having this platform will eliminate credit unions and CUSOs from having to do all the legwork to find buyers. The platform is scheduled to launch in August.

“We're trying to make it a more efficient market so that credit unions that have loans for sale and are shoring up their participations can scan all their documents into our system and a buyer is notified when a loan is available,” Taber said. [email protected]