WASHINGTON — Credit unions that want more leeway in offering member business loans will have the opportunity to express their thoughts to the NCUA.
In a unanimous vote during the brief meeting last Thursday, the board approved a request for public opinion and recommendations on issues such as loan-to-value ratio, the waiver process and the experience level of those who make decisions on these kinds of loans.
On the loan-to-value ratio issue, the NCUA asked for input regarding whether to lower the borrower equity requirement on construction and development loans from 25% to 20% and whether there should be a regulatory credit limit on business credit cards. The agency said because the C&D loans are the riskiest kind of MBLs, they require "greater regulatory restrictions to ensure safe and sound lending" but is open to other suggestions for easing restrictions as long they address safety and soundness concerns.
Recommended For You
Although some credit unions and their trade associations have called for eliminating loan-to-value ratios and letting each individual credit union decide, NCUA wrote in its staff document that that outcome is "unlikely." The agency wants input on whether they should clarify how a credit union is to establish the value of a property used to calculate the LTV ratio.
The board also is seeking comments on the LTV waiver process. In response to a question from NCUA Board Vice Chairman Rodney Hood, NCUA Staff Attorney Frank Kressman said when the public had commented on the issue, "some don't think the waiver process is as user friendly as it should be."
In response to a question from NCUA Board Chairman JoAnn Johnson, who participated by telephone, Kressman said the regulatory review covers those rules on MBLs not established by Congress.
The MBL rule that most bothers credit unions–the restriction of MBLs to 12.5% of a credit union's assets, was set by Congress. The Credit Union Regulatory Improvements Act, which has been introduced in both the House and Senate, would raise that limit to 20%.
The two major credit union associations have already outlined their strong support for regulatory relief in these and related areas and plan to file additional comments as a result of today's board vote.
"We are happy they are doing this and are hoping that there will be greater flexibility on LTV ratios, while keeping in mind safety and soundness concerns," said Carrie Hunt, NAFCU's senior counsel and director of regulatory affairs.
CUNA Senior Vice President/Deputy General Counsel Mary Dunn said this is "just the kind of thing that regulators ought to be doing. We think there are lots of items that shouldn't be in the regulations because there is no requirement that they be in there. You shouldn't need a waiver process if you didn't have restrictions on LTVs," she said.
NASCUS, which represents state regulators, is also planning to weigh in because Congress has mandated that federal and state regulators work together on determining the rules surrounding MBLs.
NCUA is also seeking input on whether the existing requirement that persons who work on MBLs have at least two years is adequate. Also, they want input on the rules regarding what role CUSOs may play in the member business loan approval process and on the application of conflict-of-interest rules.
Comments are due to NCUA by Aug. 19 and there is no timetable for when the board will act on them. The board is required to review one-third of its regulations annually.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
