NCUA COMMERCIAL LENDING REGULATIONS Flashcards
How does the NCUA Part 723 define “commercial loan”?
Definition – any loan, line of credit, or letter of credit used for commercial, industrial, agricultural, or professional purposes.
Is there a requirement for credit unions to have a commercial lending policy if they offer member business loans?
Yes OR No
Yes, before implementing a commercial lending program, the board of directors must adopt a commercial loan policy and must review that policy at least annually.
NCUA sets limits for the total amount of outstanding commercial loans to any one member or group of associated members. What are those limits?
15% of the credit union’s net worth or $100,000. An additional 10% of the credit union’s net worth can be issued if that amount above the general 15% is secured by readily marketable collateral.
NCUA sets lending limits for two different categories when it comes to commercial loans. What are those categories?
Credit unions must maintain a limit which is the lesser of 1.75 times the actual net worth of the credit union, or 1.75 times the minimum net worth required
under the Federal Credit Union Act for a credit union to be well capitalized.
NCUA Part 723 provides a list of persons ineligible for commercial loans from the credit union. List those ineligible persons.
The credit union cannot grant business loans to: 1) A senior management team member that is directly or indirectly involved in the credit union’s business loan
underwriting, servicing, and collection process, and any of their immediate family members. 2) Associated members or immediate family members of any of the above. 3) Compensated directors, if no board approval.
When granting agricultural loans, the credit union should consider a number of environmental issues. Give an example of two requests that should be made in connection with this type of loan.
A credit union should: 1) request a report on the past uses and conditions of the subject property and neighboring property; 2) require the borrower to indemnify the lender against loss or liability resulting from violations of environmental laws and damages arising from hazardous substances located on the premises; and 3) require a commitment by the borrower that environmental laws have been complied with and will continue to be complied with.
