A CUSO that purchases nonperforming loans may restructure delinquent debt it owns, so long as the credit union made the original underwriting decision and no new credit is being extended to the borrower, the NCUA recently clarified.
In a May 18 letter opinion letter, the agency responded to an inquiry from a group of state and federal credit unions on whether there were any restrictions to a CUSO's authority to purchase, sell or collect delinquent loans. The NCUA said CUSOs should not restructure a loan under their authority to purchase and service nonperforming loans so as to circumvent lending restrictions applicable to federal credit unions.
That May 18 clarification has helped the group who made the recent inquiry to take the next steps, said Michael Lozoff, a partner with Adorno & Yoss, LLP and director of the law firm's credit union group who wrote to NCUA on the credit unions' behalf. The proposed CUSO is in the concept stage, he emphasized. Because the discussions are still early, the credit unions involved requested anonymity.
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"They're discussing the feasibility, structure and fees. Coming out of those discussions is whether they can put together a business plan to circulate among their boards," Lozoff said, adding the group of credit unions is scheduled to meet on July 1.
He said NCUA's clarification "is a small point but an important one in these remarkable times of foreclosures and loan workouts."
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