After noticing several member business loan violations involvingnet worth limits and loan to value ratios, the Kansas Department ofCredit Unions has issued a reminder to state-chartered credit unionto follow the NCUA's MBL rules.

According to an April 30bulletin, the KDCU said it recently reviewed MBLsthat exceeded the maximum loan-to-value of 80%.

The Kansas regulator said it also examined credit unions wherethe limitation of 15% of the credit union's net worth was notfollowed.

“Kansas chartered credit unions that do member business lendingmust follow the NCUA Rules and Regulations Part 723.1 through723.21,” the bulletin read.

While most of the state's credit unions don't do member businesslending, KDCU Administrator John P. Smith said some appear not tobe following regulations. Kansas has not had any major issues butbecause of MBL problems at credit unions in other states, Smith said thebulletin is a just a reminder to be informed.

Among the reminders, a credit union board must use the servicesof an individual with at least two years direct experience with thetype of MBL the credit union will be engaging in.

Generally, the total of a credit union's net MBL balances andthe nonmember loan balances must not exceed the lesser of 1.75times the credit union's net worth or 12.25% of the credit union'stotal assets unless the credit union has first received approvalfrom the KDCU administrator and the NCUA regional director,according to the bulletin.

Kansas' credit unions were also reminded to be aware ofcollateral and security requirements and ensured that their boardsadopt a MBL policy with certain minimum requirements that must bereviewed annually.