Compliance Blog

Written by JiJi Bahhur, Regulatory Compliance Counsel

During the board meeting yesterday, NCUA considered and approved the loan participation final rule. Although NCUA made improvements to the rule as it was originally proposed, NAFCU still has some concerns that it will address after careful scrutiny of the final rule. 

The final rule amends Parts 701 and 741 of NCUA’s rules and regulations – the loan participation rule, eligible obligations rule and requirements for insurance rule.  For those that read the proposal, you’d be delighted to know that NCUA created a chart comparing key provisions of the proposed rule versus the final rule.  It’s a must-see. 

Once NAFCU examines the final rule more closely, we will have more details to share.  In the meantime, listed in the Board Action Bulletin are the highlights of the final loan participation rule:

• Purchasing credit unions will be subject to a single-originator concentration limit of $5 million or 100 percent of net worth, whichever is greater.

• The risk retention requirement for originating federal credit unions will be 10 percent, as required by the Federal Credit Union Act.

• The risk retention requirement for other originating eligible organizations – including federally insured, state-chartered credit unions – will be five percent, consistent with the standard for securitizers under the Dodd-Frank Act (unless state law requires a higher percentage).

• Federally insured credit unions may establish different underwriting standards for loan participations than they use when originating their own loans.

• Credit unions will have the ability to apply for waivers on certain key provisions of the rule.

The final loan participation rule is available here.  The rule is effective 30 days from its publication in the Federal Register.